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Energy & Economics
United Arab Emirates, Kuwait, Qatar, Bahrain, Saudi Arabia, Yemen and Oman. GCC Gulf Country Middle East Flag 3D Icons. 3D illustration of GCC Country Flags arranged in around the GCC Logo

Diversification nations: The Gulf way to engage with Africa

by Corrado Čok , Maddalena Procopio

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском Summary -The UAE, Saudi Arabia and Qatar have longstanding political and security interests in north and east Africa.- But the late 2010s saw a “geoeconomic turn” in their foreign policy. This has led the three Gulf states to make inroads into sub-Saharan Africa.- Energy and infrastructure are at the heart of this new economic involvement. These sectors serve Gulf interests, but they are also where Africa’s needs are greatest.- This is improving the image of Gulf states in Africa. This ties in with a trend among African governments to diversify their own international partners and foster competition among them.- The EU and its member states remain influential in Africa, but their involvement is declining. The Gulf expansion in Africa could exacerbate this—unless Europeans find a way to respond. The geoeconomic turn Africa is big business in today’s geopolitics and geoeconomics. “Great powers” have returned to compete on the continent, with rising powers like Turkey and Gulf monarchies snapping at their heels. African leaders, meanwhile, are capitalising on the fragmentation of the global order to foster competition among all these powers. In this evolving landscape, the United Arab Emirates, Saudi Arabia and to a lesser extent Qatar are looking beyond their traditional African interests. The three Gulf states have long extended their reach into east and north Africa. There, they have worked to secure land and trading routes, extract resources and project influence over their preferred versions of Islam. In so doing they have tried (and spent big) to empower friendly governments and political actors through a combination of diplomatic, economic and security-related assistance. This political-military posturing has often drawn them into competition with one another—for instance through their involvement in the conflicts in Yemen and Libya. The UAE has been by far the most assertive of the three states in this regard, with recent Emirati involvement in Sudan’s civil war prompting regional and international condemnation. Despite these political interests, the late 2010s saw a “geoeconomic turn” in the foreign policy of the Gulf powers. This has led them to make inroads deeper into Africa. The covid-19 pandemic and falling oil prices hit sectors crucial to these states economies: aviation, for instance, as well as tourism and logistics. These oil and gas producers also know that fossil fuels will be out of the picture at some point in the future, thanks to the global energy transition. With its booming markets and rich natural resources, sub-Saharan Africa brings opportunities for Gulf states to diversify their economies. Moreover, African governments offer them backing to pursue a dual approach to the energy transition: no pressure to lose the oil and gas right now (and Africa offers plenty of prospects in that regard) but opportunities also position themselves as leaders in sectors vital to future economies—from renewables to minerals. Such pragmatic engagement should guarantee Gulf states greater returns than costly security politics in their “near abroad”. This could all affect European interests in Africa, not least because the continent is also becoming a crucial partner for Europeans to sustain and diversify their own energy supplies. In our 2024 paper “Beyond competition” we examined the UAE’s involvement in African energy sectors, setting out how Europeans might mitigate the risks that poses and grasp the opportunities. This policy brief expands on that research. First, it breaks down the UAE’s, Saudi Arabia’s and Qatar’s geoeconomic activities in sub-Saharan Africa, zooming in on energy as a central focus of their strategy. Next, it analyses the divergences in the Gulf states’ economic expansion, and how these interact with their traditional African interests. Finally, it explains how Europeans should grapple with this emerging phenomenon. Africa and a fragmenting global order Over the past five years, economic and geopolitical turmoil has changed how big and rising powers compete in Africa—and how African countries relate to the rest of the world. This is the case for both political and economic engagement. Africa The African embrace of diversification reflects a broader movement within the global south that advocates a reimagined global order. Within this, a key demand is for equity, inclusivity and agency in global governance structures—indicating a deliberate pivot away from historical dependencies on Western-led models. This includes traditional frameworks of aid and development. This multipolar moment gained momentum as the tumult of the post-covid years and Russia’s invasion of Ukraine intensified. As Western states focused on economic and geopolitical upheavals closer to home, many African leaders saw neglect and self-centredness. This was exemplified in African criticism of Western vaccine hoarding, and then of the redirection of aid to Ukraine at the expense of African crises. So African leaders have increasingly sought out alternative partners.   But these developments only exacerbated a more longstanding trend. From the early 2000s onwards, Western engagement with Africa has steadily declined. Other powers—such as China, Turkey and Russia—have expanded their influence. Indeed, Russia and China in particular have leveraged African aspirations and grievances against Western-led frameworks. This has helped them legitimise their political, economic and military projection in Africa. It could also open up space for stronger West-free alliances, such as through the BRICS+ grouping (which the UAE joined and to which Saudi Arabia was invited in 2024). Gulf The African embrace of multipolarity resonates with Gulf powers, which underpin their own foreign policy with an aim to cultivate partnerships across the east-west and north-south spectrum. Gulf states do not explicitly adopt anti-Western rhetoric. But, to address their domestic imperatives, they are strategically tapping into African governments’ call for alternative partners. The three states offer their African partners development cooperation and financing that depart from the Western model. They tend to offer a more flexible and rapid deployment of funding. Their state-backed economic models also align political agendas with strategic investments. This allows them to leverage their financial resources to fill the capital and political void left by other international players. Such alignment is timely and could be mutually beneficial as African and Gulf states navigate the shifting dynamics of global power distribution. It also seems to be boosting Gulf states’ political capital with African governments. But the monarchies’ strategic interests may not always line up with Africa’s long-term development goals, which could foster extractive and exploitative relationships. Their expansion in Africa could also reduce the space for Europeans to rebuild their ties with the continent. Europe Europeans maintain a significant presence in Africa. But the fragmenting global order could challenge their status, particularly in the face of the second Trump presidency and its implications for Western unity. European economic engagement in Africa has been declining for some time, just as Western governance, aid and financing models are meeting competition For now the EU remains sub-Saharan Africa’s largest trading partner, with trade flows between the two regions valued at approximately $300bn annually. Yet, the EU’s share of trade with sub-Saharan Africa has dropped significantly since 1990. This reflects competition from countries like China, whose rapid ascent is evident in its large increases of both imports and exports with the region. Indeed, China now rivals the EU in terms of imports to sub-Saharan Africa.   Sub-Saharan Africa’s imports from China have grown especially in the consumer-goods sector, but also increasingly in the energy and other industrial sectors. The EU, meanwhile, continues to dominate in imports of high-value goods such as machinery, chemicals and vehicles. Sub-Saharan Africa exports primarily raw materials, minerals, and oil to Europe, akin to its exports to other regions, such as China and the Gulf countries. Emerging players like the UAE have witnessed a steady growth in their overall share (though percentages do not reach 10% of the total yet). Gulf-Africa (geo)economic relations on the riseInvestment and finance The scale of Gulf financial engagement in Africa underscores the monarchies’ expansion. In 2022 and 2023 the Gulf Cooperation Council states collectively funnelled nearly $113bn of FDI into the continent, exceeding their total investments over the previous decade ($102bn). The UAE, Saudi Arabia and Qatar are investing most in sectors that not only reflect their interests, but in which Africa’s needs are greatest: energy and climate and infrastructure It is the infrastructure (and connectivity) investments that form the backbone of their expansion. Interests among the states overlap, but the UAE invested first and by far the most in ports, logistics networks and special economic zones. Saudi Arabia is the main investor in roads. All three states have stakes in sub-Saharan Africa’s air connectivity, though Saudi Arabia to a lesser extent to date.  These investments open up new opportunities across the continent. They also boost the Gulf states’ geostrategic presence, helping to fill a gap in Africa’s infrastructure that China has only partially filled over the last 20 years—while the EU is only now trying to launch a comeback with the Global Gateway. Moreover, Gulf states are helping to fill the funding gap that Western financiers left as they withdrew. In 2021, for example, the UAE pledged $4.5bn to support energy transition efforts in Africa. This financial commitment is meant to support green energy, infrastructure development and the wider energy transition. In March 2024, four Emirati banks helped the Africa Finance Corporation (AFC) raise $1.15bn in the largest syndicated loan ever pooled together by the AFC. Saudi Arabia, which has long provided development assistance to Africa through the Saudi Development Fund, signed a 2023 memorandum of understanding with the AFC to jointly finance infrastructure across the continent. In late 2024 the Saudi government pledged $41bn through a mix of financing tools to finance start-ups, provide import-export credit and spur private sector growth in Africa over the next 10 years. In 2022 Qatar pledged a $200m donation for climate adaptation projects in African countries vulnerable to the impacts of climate change, including funding for drought and flood mitigation programmes, as well as renewable energy access in off-grid communities. In 2024 it contributed to the creation of Rwanda’s Virunga Africa Fund I, launched with $250m to strengthen social services and private sector growth in innovative domains in Rwanda and the rest of Africa. However, many of the investments and deals are opaque and come with limited accountability. This raises questions about whether Gulf-Africa financial and investment partnerships will truly be mutually beneficial. The balance of power often tilts in favour of the Gulf monarchies due to their financial strength, which may lead to asymmetrical outcomes—including a potential increase of debt burdens in Africa. Despite focusing on critical sectors for Africa’s development, these investments may not shift the underlying dynamics of extractivism that have historically characterised Africa’s relations with external players. As the trade data clearly show, this includes the Gulf states. Trade The UAE’s foreign policy has long been more focused on trade than that of the other two Gulf states. Accordingly, trade (including those goods it re-imports and exports via its economic zones) between the UAE and sub-Saharan Africa has grown robustly over the past decade. Qatar and Saudi Arabia, meanwhile, have seen more limited change. The UAE ventured early into trade, logistics and services to secure sustainable revenues—particularly Dubai, an emirate with very limited oil reserves. Emiratis have undertaken extensive expansion of port and transport infrastructure across Africa (led by logistics giants such as the Dubai-based DP World and, more recently, Abu Dhabi Ports). This has helped turn the UAE into a trade gateway between Africa and the world.   The composition of Gulf-Africa trade reveals deeper dynamics in the economic relationship. In line with their global trading patterns, fuels and hydrocarbon derivatives dominate Emirati, Qatari and Saudi exports to sub-Saharan Africa. This reflects the centrality of fossil fuels in Gulf states’ expansion in the continent. The population of sub-Saharan Africa is rapidly growing; the region is also industrialising and urbanising at pace. The whole of Africa’s energy demand will likely increase by 30% by 2040—including fossil fuels. This creates new markets for Gulf states in sub-Saharan Africa. Sub-Saharan African exports to the Gulf, meanwhile, are largely made up of metals and minerals, including gold, as well as agricultural products. This underscores how the export relationship is largely extractive. Gold trade is particularly notable in the sub-Saharan Africa-UAE relationship, helping consolidate the country as a key global importer and refiner of the precious metal.   These trade patterns highlight mutual dependencies but also expose structural imbalances. Sub-Saharan Africa’s export profile—heavily skewed toward raw commodities—limits its benefits to African states, while Gulf countries capitalise on higher-value imports and exports. Energy diplomacy and the green transition Africa’s vast natural resources mean the continent is central to the global energy transition. Alongside reserves of oil and gas, it boasts plentiful minerals essential for renewable technologies (such as lithium, cobalt and rare earth elements), abundant solar energy potential, and well-preserved forests for carbon offset. This, combined with the region’s large and increasing energy demand, helps centre energy and climate in the Gulf’s African expansion. A rapid transition away from fossil fuels is unrealistic for the Gulf states, given their reliance on them for export revenues and GDP. In Africa, meanwhile, oil and gas still account for 40% of energy consumed by end users (its final energy consumption). As discussed, this creates new markets for Gulf states in which they can help meet Africa’s current and future demand. But Africa also acts as a gateway to new energy value chains. Gulf leaders know the hydrocarbon era is waning. This means they could lose the leverage oil and gas brought them in global energy governance. To maintain their relevance, they aim to lead in green economies too. They therefore work to integrate Africa’s energy markets and resources into their broader strategy for sustainable economic transformation. Hydrocarbons Gulf countries’ economies are betting on African governments’ interest in further exploiting their oil and gas resources to increase revenues and fulfil growing demand. Saudi Arabia and the UAE are mostly eyeing investments in distribution (downstream), and transportation and storage (midstream); while they have traditionally shown limited interest in Africa’s oil and gas exploration and production (upstream). Qatar, by contrast, is more focused on exploring upstream production and increasing its stakes in Africa’s LNG sector. This aligns with Qatar’s unique energy profile as a leader in the global LNG market. It also gels with its long-term strategy to consolidate global dominance in natural gas, especially as the energy transition increases demand for cleaner-burning fuels like gas. The UAE might be eyeing Africa’s LNG sector as well, as it expects natural gas to contribute more significantly to its energy mix by 2050, but currently relies on Qatar for nearly one-third of its supply. Africa may prove helpful in expanding gas investments. Emirati energy giant Abu Dhabi National Oil Company, for example, has a stake in Mozambique’s Rovuma LNG project and a gas deal with BP in Egypt.   African countries find common ground with the Gulf states in resisting the rapid phase out of oil and gas advocated by advanced economies. For African nations, oil and gas remain vital sources of revenue, industrial growth and energy security; Gulf states need these resources as they are integral to their global influence and economic diversification efforts. This challenges the European position on oil and gas, and their reciprocal alignment could cement stronger consensus around a dual approach to the energy transition. Green value chains The UAE’s “We the UAE 2031” vision and Saudi Arabia’s “Vision 2030” are economic reform plans that include commitments to diversify their economies away from hydrocarbons. This underscores their leaders’ recognition that fossil fuels may not be around forever, but mainly that green value chains hold great value. The UAE and Saudi Arabia (but much less so Qatar) are therefore investing in the green energy transitions, both at home and abroad. Their investment also allows them to maintain their influence in global energy decision-making, including the speed and pathways to a net-zero world and economy. With its abundant solar and wind resources, sub-Saharan Africa is an ideal testing ground for Gulf countries to expand their renewable energy expertise. It is also an environment in which they can develop scalable projects and build exportable green technology capacities. All three Gulf states are investing in solar and wind plants across sub-Saharan Africa. They have also shown appetite in other renewable fields, such as batteries, green hydrogen and thermal energy. The UAE leads in this through its companies Masdar and AMEA Power; Saudi Arabia’s ACWA Power is also getting in on the act. Qatar has been eyeing opportunities for investments, though it favours joint or brownfield investments in large foreign companies’ projects to limit risks and costs.   Though several of these commitments are today pledges, their involvement could potentially contribute to expanding access to energy in Africa, helping address the continent’s critical energy deficit. Their dual-track approach to the energy transition allows them to advocate for a pragmatic transition that balances decarbonisation with energy security and economic development, enhancing their reputation among African governments as forward-thinking states on energy. Critical minerals At the same time, the UAE and Saudi Arabia are investing in mineral value chains. This underlines the strategic importance of these resources in their economic diversification and technological ambitions. Gold is the top import product from Africa to the UAE. But other minerals such as copper also rank high in Emirati imports—and in those to Saudi Arabia as well. These minerals are the backbone of the green economy. They are also critical for the digital transformation (including AI and defence, with the UAE eyeing dual-use minerals as it develops its national defence industry), but also infrastructure. In line with its trade-focused foreign policy, the UAE is seemingly more interested in tapping into the trade of these commodities. Saudi Arabia, meanwhile, seems keen to access raw resources for import, necessary to boost its industrial ambitions at home. Under Vision 2030, Saudi Arabia aims to develop domestic manufacturing and high-tech industries, such as electric vehicles and renewable energy technologies. Accessing African minerals aims to support this strategy by providing the necessary input for domestic production, and enabling Saudi Arabia to move up the value chain.   For African countries, the global race for critical minerals is a unique opportunity to move beyond their traditional role as providers of raw commodities. Many African governments recognise the potential of these resources to catalyse industrialisation, create jobs and generate more value domestically. This shift in perspective has led to increasing demands for investments that prioritise local processing and manufacturing rather than merely extracting and exporting raw materials. However, the extent to which Gulf players will align with these aspirations remains uncertain. Where the Gulf states diverge Despite some similar drivers, Emirati, Saudi and Qatari approaches in Africa vary significantly. The nuances stem from the states’ different domestic imperatives and foreign policy strategies. Although the shift to geoeconomics is clear, this underlines how the three states—especially the UAE—could still influence security across the continent as well as in their traditional regions of interest. Country profiles The UAE lacks significant domestic industrial capacity (except for the gold sector). This means it needs bigger and better trade routes to secure its revenues. Here, Africa’s expanding consumer markets and its centrality in green value chains offers an opportunity. Abu Dhabi adopts a risk-prone, largely state-backed, approach—though this is mitigated by a strong orientation towards economic returns. The UAE’s presence is becoming increasingly entrenched across the African continent. Despite focusing outwardly on economics, the UAE’s ability to leverage political influence to safeguard its interests has not gone away, as its involvement in Sudan shows. This politico-security approach is less visible in other parts of Africa, though it remains a tool that could shape Emirati-African relations in the years ahead. As the UAE’s economic interests expand in Africa, its leaders may find they have more to protect—which could increase the risk of them deploying the security approach.  The UAE’s energy diplomacy reinforces the idea that the country’s involvement in Africa will extend beyond economic ventures: the 2024 COP28 climate conference in Dubai, for instance, laid bare Emirati ambitions to position the UAE as a global leader in the energy transition. African alignment with the monarchy on the need for a dual approach makes Africa a key arena for Abu Dhabi to mobilise consensus. Saudi Arabia faces urgent domestic socio-economic imperatives linked to a growing population (largely under the age of 25) and high unemployment rates. This contrasts with the UAE and Qatar, which grapple with a shortage of domestic workforce. Africa is therefore appealing as a contributor to Riyadh’s economic transformation programme, which envisages a strong diversification of the economy. Green value chains rank high amid these efforts. But internal socio-economic constraints and the urgency of domestic reforms have prompted Riyadh to adopt a risk-averse stance. This has resulted in cautious and geographically limited engagement across the African continent. This caution contrasts with Riyadh’s more interventionist posture in the 2010s in the near abroad. Its aggressive policies to gain allies on the African side of the Red Sea strained rivalries with its neighbours. This included, for instance, the monarchy’s war against Houthis in Yemen from 2015, and its interference that contributed to the ousting of Sudan’s president Omar al-Bashir in 2019. Saudi Arabia now relies more on soft power and economic diplomacy, leveraging its traditional leadership of the Muslim world and development aid to advance its influence. This has led it towards a new approach largely oriented towards stabilisation—especially in the Horn of Africa—and multilateral dialogue. Yet, as Riyadh seeks to balance economic imperatives with geopolitical caution, its engagement in Africa remains transactional. Today, it is driven by immediate strategic needs rather than a long-term vision. Qatar, unlike the UAE and Saudi Arabia, is less constrained by energy transition-related pressures. Its reliance on gas provides Doha with greater economic stability (albeit vulnerable to overdependence on gas for revenues) and a competitive edge in the global energy market. Qatar has not to date significantly changed its approach to Africa, which is characterised by a focus on selective, strategically significant investments that hold both political and economic relevance. These targeted initiatives aim to strengthen bilateral ties in key sectors rather than pursuing broad-based engagement. This restraint is a reflection of Doha’s limited institutional knowledge of Africa and an overall risk-averse foreign policy, which often leads to it to engage in brownfield investments rather than expand into new ventures. Qatar, similar to Saudi Arabia, pursues a soft-power approach to political affairs on the continent. This is characterised by a strong emphasis on conflict mediation. It has played key diplomatic roles in past negotiations, such as in the Darfur conflict, the Eritrea-Djibouti border dispute and Somali reconciliation efforts. More recently, in March 2025 it hosted mediations between the Democratic Republic of Congo and Rwanda, managing to bring both sides to the table where other negotiators failed. This approach aims to enhance its global standing as a facilitator of dialogue and peace. Its Africa strategy is a balancing act between economic priorities and broader diplomatic ambitions.   What this means for Europe The EU and its member states will have to work with Gulf states in Africa. If they fail to do so, their political and economic decline on the continent could accelerate. This would also likely open up space for power blocs such as Gulf-China and Gulf-Russia partnerships to deepen their relations with African countries. But a lack of engagement with Gulf states also means Europeans would miss out on opportunities. Crucially, Europeans could benefit from collaboration with Gulf powers to align with African governments in shaping reciprocal green industrial transitions. These risks and opportunities stem from the strengths and weaknesses of Gulf states’ involvement in Africa.   These features also create synergies between Europe and Gulf states in Africa. The EU and its member states can add unique value to sectors vital to Gulf states’ interests, which could help mitigate the risks both sides face. Gulf countries, for example, would benefit from European technological know-how and innovation in sectors such as renewable energy. Moreover, Europeans have extensive experience and interest in human capital development; Saudi Arabia’s and Qatar’s soft-power approach means they have a growing interest in providing education and training. This could combine to help build the skilled and educated workforce that Africa’s rapid development and industrialisation requires. More synergies exist in Europeans’ longstanding political and institutional presence across Africa, as well as their focus on regulatory frameworks and experience dealing with African markets and governance structures. This could all be of use to the less Africa-experienced Gulf countries, helping to minimise their exposure to political and economic uncertainties. Europeans would gain reciprocal benefits through access to Gulf states’ financial resources, their capacity to roll out large scale projects, and their work to expand connectivity. The monarchies are also building greater influence in forums such as the UN and the G20, and more specifically in the energy sector (the COP climate conferences, for example, but also Saudi Arabia’s Future Minerals Forum). Through this, Europeans could leverage their relations with Gulf states in Africa to respond to the demands of the global south for equality in global governance. This would not only bolster Europe’s role in Africa’s sustainable growth but also help Europeans maintain a competitive edge in the evolving global energy and geoeconomic landscape. African governments would also benefit. Cultivating a diverse range of international partners lies at the heart of their newly enhanced bargaining geopolitical and economic power. This means that fostering Europe-Gulf cooperation could be vital for Africans to mitigate the risks of a declining European presence and the expanding (but still nascent) expansion by Gulf states. How Europeans should respond Initially, the EU and its member states should focus on four opportunities for cooperation with Gulf and African states. 1.Energy cooperation and access. The growing presence of Gulf states in Africa’s energy transition means Europeans can help improve access to (clean) energy across the continent. Gulf states are investing in power-generation projects and transport networks. These could enhance Africa’s economic growth, contribute to its market expansion (also through regional integration), and make the continent more attractive for other investors. Europe’s technological expertise in renewable energy complements the Gulf states’ investment capabilities and ambitions in this sector. a.Opportunity: Europeans should consider joint investment with Gulf states in Africa’s renewable energy projects. The UAE’s Masdar and Saudi Arabia’s ACWA Power can roll out large-scale renewable projects. European governments and companies would benefit from collaboration with such companies and with African governments, not only to help boost Africa’s renewable capacity but also to reduce the risks and costs of investment. For example, the government of Mauritania is already collaborating with the UAE’s Infinity Power and the German developer Conjuncta to develop a 10 gigawatt green hydrogen plant in the country. European energy companies should also leverage Qatar’s risk-aversion and interest in reducing risks via partnerships to expand their operations (as hinted at in a 2024 deal between Italy’s Enel Green Power and the Qatar Investment Authority). b.Risk: If Europeans do not take up such opportunities, Gulf countries could end up dominating Africa’s renewables sector. Their involvement in the continent’s energy market expansion may prioritise Gulf-centric policies over European or African climate and energy as well as industrial interests. Without a stronger European presence, Europe risks missing opportunities to contribute shaping Africa’s energy landscape in a way that aligns with both European interests and global climate objectives. 2.Cross-regional infrastructure development. The Gulf states’ investment in infrastructure and regional connectivity mean Europeans could help boost Africa’s economic growth and stimulate investors’ interest. Given the sheer scale and complexity of these projects, trilateral cooperation would help distribute costs, risks and expertise. By proactively collaborating with Gulf states, in particular the UAE and Saudi Arabia, Europeans can secure a role in Africa’s infrastructure transformation. This would help them ensure that major projects also align with European trade interests and long-term strategic priorities. a.Opportunity: The EU and member states should cooperate with Gulf and African states on infrastructure, focusing on the UAE’s maritime and logistics capabilities and Saudi Arabia’s substantial infrastructure investment. This would enable them to accelerate critical projects, from roads to power plants and energy distribution systems. Europeans should also collaborate with Gulf and African states on cross-regional railways. Trilateral cooperation on such initiatives as the “Lobito Corridor” (linking Angola, DRC and Zambia) would contribute to the development of high-impact infrastructure that no single state could easily undertake alone. b.Risk: If Europe does not do this, it risks being sidelined from new trade corridors and supply chains that will shape the continent’s economic and geopolitical landscape. Control over critical infrastructure—ports, railways, logistics hubs and energy networks—is a vital tool of geoeconomic influence, determining who facilitates and benefits from Africa’s economic growth. If Europe remains passive, Gulf and other external actors could shape Africa’s infrastructure in ways that reduce European access, limit European firms’ market participation and weaken Europe’s overall influence on regional economic integration. 3.Capacity building and human capital development. Africa’s rapid development requires an educated and skilled workforce. Saudi Arabia and Qatar have a growing interest in education and vocational training, an area in which Europeans have extensive experience. This is another potential area for trilateral cooperation. a.Opportunity: The EU and member states should collaborate with African and Gulf countries to launch joint capacity-building initiatives. Europeans would bring a unique contribution to these efforts through their experience in advanced training models, institution-building and regulatory frameworks. Moreover, African countries should proactively coordinate new Gulf efforts with European know-how, particularly in vital sectors such as energy and infrastructure. b.Risk: Inaction from European and African governments could mean Gulf-led training programmes shape Africa’s workforce according to the monarchies’ strategic priorities. This risks limiting European influence in Africa’s future development. It could also compromise European access to a skilled African workforce—essential to ensure foreign investors can ensure they meet African demands for local content. 4.Financial instruments and investment mechanisms. Africa’s development requires significant capital inflows, but investors often see the continent as high risk. The Gulf states’ growing role as both a financier and developer of Africa’s energy infrastructure presents opportunities for joint de-risking strategies. This would help both European and Gulf investors to overcome these risks. By pooling resources and expertise, Europe and Gulf countries can expand the capital available to fill Africa’s financing gaps—particularly for large-scale energy and infrastructure projects. a.Opportunity: European financial institutions should work with their African counterparts and Gulf investors and developers to de-risk their investment in Africa. This should include, for example, the European Investment Bank and European Bank for Reconstruction and Development, but also member states’ development banks such as the KfW (Germany) or Cassa Depositi e Prestiti (Italy). Such collaboration would help them de-risk investments and roll out large-scale infrastructure and energy projects, or scale up existing ones. This collaboration would appeal particularly to risk-averse countries such as Saudi Arabia and Qatar. b.Risk: Without this, Gulf investors could increasingly dominate Africa’s investment landscape. This shift could result in financial structures that, while effective for Gulf interests, may not align with European business practices, regulatory standards or long-term sustainability goals. That would likely result in European companies facing a more competitive and opaque investment environment. It could also erode Europe’s ability to promote investments that meet both Africa’s needs and European objectives. These four initial opportunities could act as a testing ground for trilateral cooperation. This, in turn, may create new synergies between all three parties. Europeans would then be well placed to build on this initial engagement to safeguard its geopolitical and geoeconomic interests in Africa; while developing new partnerships with rising powers that may benefit Europeans well beyond the continent.  Acknowledgements We would like to thank the Bill and Melinda Gates Foundation for their generous support that allowed us to organise workshops and conduct extensive research and travel. We are immensely grateful to Kim Butson, our editor, for helping us keep a clear direction, and for her unwavering patience especially in the last editorial phases. And to Nastassia Zenovich for giving such a great visual shape to our ideas. We are also very thankful to the entire ECFR Africa and MENA teams’ colleagues for regular brainstorming and helping us challenge our assumptions. Last but not least, this paper would not have been possible without the many officials, diplomats, experts and thinkers in Europe, Africa and the Gulf, who generously dedicated their time and ideas, contributing significantly to shaping this project.This article was first published by the European Council on Foreign Relations (ECFR) [here].

Energy & Economics
Nottinghamshire, UK 03 April 2025 : Attitudes of UK broadsheet newspaper after Trump unleashes Liberation Day Tariff announcement

The EU at the Crossroads of Global Geopolitics

by Krzysztof Sliwinski

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском Abstract This study examines the short-term, medium-term, and long-term implications of recent "tariff wars" on the European Union (EU). The imposition of tariffs by the United States, particularly the "Liberation Day" tariffs announced by President Trump on April 2, 2025, led to significant disruptions in global supply chains, negatively impacted GDP growth, increased financial market volatility, and exacerbated geopolitical tensions. The EU faces challenges in navigating this shifting geopolitical landscape while maintaining its economic interests and influence. However, the EU has opportunities to leverage these conflicts to strengthen its internal market, foster international cooperation, and emerge as a more resilient global actor. The paper concludes by discussing the potential end of transatlanticism, the future of the EU, and the implications for globalisation in light of the current "tariff chaos." Keywords: Tariffs, Geopolitics, European Union, Trade Wars Introduction Before we examine the topic of tariffs, let us recall that the terms "tariff war" or "trade war" are not strictly academic. International Security scholars generally believe that the notion of war is reserved for military conflicts (both domestic and international) that involve at least a thousand casualties in any given year.[1] One of the most prominent sources in this regard is the Armed Conflict Dataset Codebook, published by the Uppsala Conflict Data Program at the Department of Peace and Conflict Research, Centre for the Study of Civil Wars, and the International Peace Research Institute at Uppsala University in Uppsala.[2] Therefore, "tariff war" or "tariff wars" are more journalistic and hyperbolic. Hence, they are used in this study with quotation marks. Journalists and commentators from various backgrounds often use inflated language to impress their readers. On the other hand, wars are cataclysmic events that have game-changing consequences. In this sense, some tools that state leaders use to achieve political and economic goals, such as tariffs, may have short- and long-term outcomes. Nonetheless, scholars who tend to be precise in their explanations will mainly discuss economic competition rather than "economic war" or "wars." This study investigates the short-, medium-, and possible long-term implications of "tariff wars" on the European Union. These implications appear multifaceted and encompass stability, political relationships, and a broader international order."Liberation Day" On April 2, US President Trump announced new tariffs under the banner of "Liberation Day" – a minimum baseline of 10 per cent tariffs on goods imported from all foreign countries and higher, reciprocal tariffs on nations that impose tariffs on US exports.[3]  Crucially, the White House claims that the new tariffs are reciprocal: "It is the policy of the United States to rebalance global trade flows by imposing an additional ad valorem duty on all imports from all trading partners except as otherwise provided herein. The additional ad valorem duty on all imports from all trading partners shall start at 10 per cent, and shortly thereafter, the additional ad valorem duty shall increase for trading partners enumerated in Annex I to this order at the rates set forth in Annex I to this order. These additional ad valorem duties shall apply until such time as I determine that the underlying conditions described above are satisfied, resolved, or mitigated".[4] We did not have to wait for strong reactions to occur worldwide. China vowed to retaliate against the 34 per cent tariffs imposed by the US on Wednesday (April 2 2025) and protect its national interests while condemning the move as "an act of bullying".[5] Doubling down, a few days later, Trump threatened a 50 per cent tariff on China on top of previous reciprocal duties,[6] to which Chinese President Xi Jinping already replied hawkishly.[7] In an equally hawkish response, the Trump administration declared that Chinese goods would be subject to a 145 per cent tariff.[8] In a twist of events, on April 9, the US  declared a 90-day-long pause for previously declared tariffs covering the whole world (keeping a minimum of 10 per cent, though) except against China.[9] The next couple of weeks will show whether the world will enter the "tariff arms race" or we will enter some "tariff détente". Importantly, as one can surmise, "Xi has sold himself domestically and internationally as the guy standing up to America, and people that want to stand up to America should get in line behind Chairman Xi".[10] For the EU, European Commission President Ursula von der Leyen described US universal tariffs as a significant blow to the world economy and claimed that the European Union was prepared to respond with countermeasures if talks with Washington failed. Accordingly, the EU was already finalising a first package of tariffs on up to 26 billion Euro ($28.4 billion) of US goods for mid-April in response to US steel and aluminium tariffs that took effect on March 12.[11] Consequently, on April 7, 2025, a meeting was organised in Luxembourg[12] regarding the EU's response to US tariffs on steel and aluminium and the preparation of countermeasures, which included a proposal to impose 25 per cent tariffs on US goods. Interestingly, the "Liberation Day" tariffs do not include Russia. According to numerous commentators, this indicates Moscow's importance as a future trade partner once the Ukrainian war is over. However, the official explanation issued by the White House suggests that the existing sanctions against Russia "preclude any meaningful trade."[13] Tariff imposition: short, medium and long-term consequences Several observable phenomena can be identified regarding their economic ramifications: First, the imposition of tariffs can lead to significant disruptions in global supply chains, thereby affecting industries that rely heavily on international trade. This disruption can lead to increased costs and reduced competitiveness for EU businesses, particularly in sectors such as agriculture and manufacturing.[14] While national measures may yield political and economic benefits in the short term, it is essential to note that global prosperity cannot be sustained without cooperative and stable international trade policies. Second, the Gross Domestic Product is likely to be impacted. The imposition of tariffs has been shown to negatively affect GDP growth. For instance, the US-China "trade war" decreased the GDP of both countries, which could similarly affect the EU if it becomes embroiled in similar conflicts.[15] Third, we examine volatility in the financial markets. "Tariff wars" contribute to financial market volatility, which can cause a ripple effect on EU economic stability. This volatility can deter investment and slow economic growth.[16] Fourth, political targeting and retaliation. "Tariff wars" often involve politically targeted retaliations, as seen in the US-China trade conflict. The EU has been adept at minimising economic damage while maximising political targeting, which could influence its future trade strategies and political alliances.[17] Fifth, global alliances are shifting. The EU may need to reconsider its trade alliances and partnerships in response to these shifting dynamics. This could involve forming new trade agreements or strengthening existing ones to mitigate the impact of "tariff wars."[18] Next, increased geopolitical competition and economic nationalism can exacerbate tensions between major powers, potentially leading to a crisis in globalization. As an aspiring global player, the EU must navigate these tensions carefully to maintain its influence and economic interests.[19] Social impacts should also be considered. "Trade wars" can lead to changes in employment and consumer prices, thus affecting the EU's social equity and economic stability. These changes necessitate policies that enhance social resilience and protect vulnerable populations.[20] Does Team Trump have a plan? The tariffs imposed by the Trump administration appear to be part of a broader strategy that Trump describes as a declaration of economic independence for the US, notably heralding them as part of the national emergency. The long-term effects of this strategy depend on how effectively the US can transition to domestic production without facing significant retaliation or trade barriers from other nations. Notably, the US dollar's status as the world's primary reserve currency has been supported by military power since the introduction of the Bretton Woods system. The US military, especially the US Navy, has helped secure trade routes, enforce economic policies, and establish a framework for international trade, favouring the US. dollar. The countries that subscribed to the system also gained access to the US consumer market. Importantly, what is explained by the Triffin Dilemma, back in the 1960s, the US had a choice: to either increase the supply of the US Dollar,  sought after by the whole world as a reserve currency and international trade currency and that way to upkeep global economic growth, which was pivotal for the US economy or to end the gold standard. In 1971, the US finished its Bretton Woods system. What followed was a new system primarily dictated by neoliberalism based on low tariffs, free capital movement, flexible exchange rates and US security guarantees.[21] Under that neoliberal system, reserve demand for American assets has pushed up the dollar, leading it to levels far in excess of what would balance international trade over the long run.[22] This made manufacturing in the US very expensive, and consequently, the deindustrialisation of the US followed. Therefore, it appears that Trump wants to keep the US dollar as the world's reserve currency and reindustrialise the US. According to Stephen Miran, chair of the Council of Economic Advisers (a United States agency within the Executive Office of the President), two key elements to achieve this goal are tariffs and addressing currency undervaluation of other nations.[23] The second element in that duo is also known as the Mar-a-Lago Accord.[24] Scott Bessent, 79th US Secretary of the Treasury, picked up this argument.[25] In a nutshell, the current "tariff chaos" is arguably only temporary, and in the long term, it is designed to provide an advantage for the US economy.A readjustment of sorts fundamentally reshapes the existing international political economy. Whether or not this plan works and achieves its goals is entirely different. As market analysts observe, "For the past two decades, the US has focused on high-tech services like Amazon and Google services, which have added to a service surplus. However, the real sustainable wealth comes from the manufacturing of goods, which, for the US, went from 17 per cent in 1988 to 10 per cent in 2023 of GDP. The entire process of building goods creates many mini ecosystems of production/capital value that stay in a country for many decades. […] Initially, the Chinese started in low-tech and low-cost labour manufacturing before 2001, but shifted towards becoming major manufacturers of high-tech products like robotics and EV automobiles. […] For President Trump to levy high tariffs on the Chinese in the current moment, he is doing everything that he can to resuscitate US manufacturing".[26] EU's options The EU and the US share the world's largest bilateral trade and investment relationship, with 2024 data showing EU exports to the US at 531.6 billion euros and imports at 333.4 billion euros, resulting in a 198.2 billion Euro trade surplus for the EU.[27] While the EU faces significant challenges due to "tariff wars," there are potential opportunities for positive outcomes. The EU can leverage these conflicts to strengthen its internal market and enhance its role in global trade. By adopting proactive trade policies and fostering international cooperation, the EU can mitigate the negative impacts of "tariff wars" and potentially emerge as a more resilient and influential global actor. However, this requires careful navigation of the complex geopolitical landscape and a commitment to maintaining open and cooperative trade relations. It seems likely that the EU can leverage recent US tariffs to strengthen ties with China and India, potentially reducing its dependency on US trade. China is the EU's second-largest trading partner for goods, with bilateral trade at 739 billion euros in 2023, though a large deficit favouring China (292 billion euros in 2023).[28] The EU's strategy is to de-risk, not decouple, focusing on reciprocity and reducing dependencies; however, competition and systemic rivalry complicate deeper ties. Meanwhile, India's trade with the EU was 124 billion euros in goods in 2023, and ongoing free trade agreement (FTA) negotiations, expected to conclude by 2025, could yield short-term economic gains of 4.4 billion euros for both.[29] India's fast-growing economy and shared interest in technology make it a potentially promising partner. EU and China: Opportunities and Challenges Economically, there are more opportunities than challenges. China remains the EU's second-largest trading partner for goods, with bilateral trade reaching 739 billion euros in 2023, down 14 per cent from 2022 due to global economic shifts.[30] The trade balance shows a significant deficit of 292 billion euros in 2023, driven by imports of telecommunications equipment and machinery, whereas EU exports include motor cars and medicaments. The EU's strategy, outlined in its 2019 strategic outlook and reaffirmed in 2023, positions China as a partner, competitor, and systemic rival, focusing on de-risking rather than decoupling. Recent actions, such as anti-dumping duties on Chinese glass fibre yarns in March 2025, highlight tensions over unfair trade practices. Despite these challenges, China's market size offers opportunities, especially if the EU can negotiate for better access. However, geopolitical rivalry complicates deeper ties, including EU probes, in Chinese subsidies. Politically, the EU and China differ significantly in this regard. Regarding human rights policies, the EU consistently raises concerns about human rights issues in China.[31] These concerns often lead to friction, with the European Parliament blocking trade agreements and imposing sanctions on them. Moreover, China's stance on the war in Ukraine has created tension, with the EU viewing Russia as a major threat, and China's support of Russia is a significant concern.[32] China is often perceived in Western European capitals as not making concessions on issues vital to European interests.[33] The understanding of the war's root causes, the assessment of implications, risks or potential solutions - in all these areas, the Chinese leadership on the one hand and the European governments and the EU Commission in Brussels on the other hand have expressed very different, at times even contrary, positions.[34] Finally, China's political model demonstrates that democracy is not a prerequisite for prosperity, challenging Western emphasis on democracy and human rights.[35] EU and India: Growing Partnership and FTA Prospects and Political Challenges Economically, it seems that there are more opportunities than challenges. India, ranked as the EU's ninth-largest trading partner, accounted for 124 billion euros in goods trade in 2023, representing 2.2 per cent of the EU's total trade, with growth of around 90 per cent over the past decade.[36] Services trade reached nearly 60 billion euros in 2023, almost doubling since 2020, with a third being digital services.[37] The EU is India's largest trading partner, and ongoing negotiations for a free trade agreement (FTA), investment protection, and geographical indications, initiated in 2007 and resuming in 2022, aim for conclusion by 2025.[38] A 2008 trade impact assessment suggests positive real income effects, with short-term gains of 3–4.4 billion euros for both parties. The EU seeks to lower Indian tariffs on cars, wine, and whiskey. Simultaneously, India has pushed for market access to pharmaceuticals and easier work visas for IT professionals. However, concerns remain regarding the impact of EU border carbon taxes and farm subsidies on Indian farmers. Politically, challenges to EU-India relations stem from several sources. Trade has been a persistent friction point, with negotiations for a free trade agreement facing roadblocks (Malaponti, 2024). Despite the EU being a significant trading partner for India,[39] differing approaches to trade liberalization have hindered progress. India's historical emphasis on autonomy and self-reliance can sometimes clash with the EU's multilateral approach.[40] Further, India's complex relationship with Russia, particularly its continued reliance on Russian defence technology, presents a challenge for closer EU-India security cooperation.[41] Finally, while the EU and India share concerns about China's growing influence, their strategies for managing this challenge may differ. These issues, if left unaddressed, could limit the potential for a deeper, more strategic partnership between the EU and India.[42] Conclusions "What does Trump want? This question is on the minds of policymakers and experts worldwide. Perhaps we are witnessing the opening salvo of a decisive phase of the US-China economic conflict - the most serious conflict since 1989. It is likely the beginning of the end of the ideology of Globalism and the processes of globalisation. It is arguably aggressive "decoupling" at its worst and the fragmentation of the world economy. For the EU, this is a new situation which dictates new challenges. Someday, probably sooner than later, European political elites will have to make a choice. To loosen or perhaps even end the transatlantic community and go against the US. Perhaps in tandem with some of the BRICS countries, such as India and China, or swallow the bitter pill, redefine its current economic model, and once again gamble with Washington, this time against the BRICS. It seems that the EU and its member states are at a crossroads, and their next choice of action will have to be very careful. In a likely new "Cold War" between the US and this time, China, the EU might not be allowed to play the third party, neutral status. One should also remember that Trump, like Putin or Xi, likes to talk to EU member states' representatives directly, bypassing Brussels and unelected "Eureaucrats' like Ursula Von der Leyen. In other words, he tends to leverage his position against the unity of the EU, which should not be surprising given the internal EU conflicts. More often than not, Hungary, Slovakia, Italy, or Nordic members of the EU clash on numerous Issues with Berlin, Paris and most importantly, Brussels. (I write more about it here: Will the EU even survive? Vital external and internal challenges ahead of the EU in the newly emerging world order. https://worldnewworld.com/page/content.php?no=4577).   References [1] See more at:  For detailed information, consult one of the most comprehensive databases on conflicts run by Uppsala Conflict Data Programme at: https://ucdp.uu.se/encyclopedia[2] Pettersson, Therese. 2019. UCDP/PRIO Armed Conflict Dataset Codebook, Version 19.1. Uppsala Conflict Data Program, Department of Peace and Conflict Research, Uppsala University, and Centre for the Study of Civil Wars, International Peace Research Institute, Oslo. https://ucdp.uu.se/downloads/ucdpprio/ucdp-prio-acd-191.pdf[3] Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits. https://www.whitehouse.gov/presidential-actions/2025/04/regulating-imports-with-a-reciprocal-tariff-to-rectify-trade-practices-that-contribute-to-large-and-persistent-annual-united-states-goods-trade-deficits/[4] Regulating Imports with a Reciprocal Tariff to Rectify… op. cit.[5] Hanin Bochen, and Ziwen Zhao. "China vows to retaliate after 'bullying' US imposes 34% reciprocal tariffs". South China Morning Post. April 3 2025. https://www.scmp.com/news/us/diplomacy/article/3304971/trump-announced-34-reciprocal-tariffs-chinese-goods-part-liberation-day-package[6] Megerian, Chris and Boak, Josh. "Trump threatens new 50% tariff on China on top of 'reciprocal' duties". Global News. April 7, 2025. https://globalnews.ca/news/11119347/trump-added-50-percent-tariff-china/[7] Tan Yvette, Liang Annabelle and Ng Kelly. "China is not backing down from Trump's tariff war. What next?". BBC, April 8 2025. https://www.bbc.com/news/articles/ckg51yw700lo[8] Wong, Olga. “Trump further raises tariffs to 120% on small parcels from mainland, Hong Kong”. South China Morning Post, 11 April 2025. https://www.scmp.com/news/hong-kong/hong-kong-economy/article/3306069/trump-further-raises-tariffs-120-small-parcels-mainland-hong-kong?utm_source=feedly_feed[9] Chu, Ben. “ What does Trump's tariff pause mean for global trade?”, BBC, 10 April, 2025. https://www.bbc.com/news/articles/cz95589ey9yo[10] Wu, Terri. "Why US Has Upper Hand Over Beijing in Tariff Standoff". The Epoch Times April 7, 2025. https://www.theepochtimes.com/article/why-us-has-upper-hand-over-beijing-in-tariff-standoff-5838158?utm_source=epochHG&utm_campaign=jj  [11] Blenkinsop, Philip, and Van Overstraeten, Benoit. "EU plans countermeasures to new US tariffs, says EU chief." April 3, 2025. https://www.reuters.com/markets/eu-prepare-countermeasures-us-reciprocal-tariffs-says-eu-chief-2025-04-03/[12] Payne, Julia. The EU Commission proposes 25% counter-tariffs on some US imports, document shows". Reuters, April 8, 2025. https://www.reuters.com/markets/europe/eu-commission-proposes-25-counter-tariffs-some-us-imports-document-shows-2025-04-07/  [13] Bennett, Ivor. "US seems content to cosy up to Russia instead of imposing tariffs." Sky News, April 4, 2025. https://news.sky.com/story/us-seems-content-to-cosy-up-to-russia-instead-of-coerce-it-with-tariffs-13341300[14] Angwaomaodoko, Ejuchegahi Anthony. "Trade Wars and Tariff Policies: Long-Term Effects on Global Trade and Economic Relationship." Business and Economic Research, 14, no. 4 (October 27, 2024): 62. https://doi.org/10.5296/ber.v14i4.22185[15] Ilhomjonov, Ibrohim, and Akbarali Yakubov. "THE IMPACT OF THE TRADE WAR BETWEEN CHINA AND THE USA ON THE WORLD ECONOMY," June 16, 2024. https://interoncof.com/index.php/USA/article/view/2112[16] Angwaomaodoko, Ejuchegahi Anthony. "Trade Wars and Tariff Policies: Long-Term Effects on Global Trade and Economic Relationship." Business and Economic Research 14, no. 4 (October 27, 2024): 62. https://doi.org/10.5296/ber.v14i4.22185[17] Fetzer, Thiemo, and Schwarz Carlo. "Tariffs and Politics: Evidence from Trump's Trade Wars." Economic Journal 131: no. 636 (May 2021): 1717–41. https://doi.org/10.1093/ej/ueaa122[18] Angwaomaodoko, Ejuchegahi Anthony. "Trade Wars and Tariff Policies: Long-Term Effects on Global Trade and Economic Relationship …op. cit.[19] Mihaylov, Valentin Todorov, and Sławomir Sitek. 2021. "Trade Wars and the Changing International Order: A Crisis of Globalisation?" Miscellanea Geographica 25: 99–109. https://doi.org/10.2478/mgrsd-2020-0051[20] Wheatley, Mary Christine. "Global Trade Wars: Economic and Social Impacts." PREMIER JOURNAL OF BUSINESS AND MANAGEMENT, November 5, 2024. https://premierscience.com/wp-content/uploads/2024/11/pjbm-24-368.pdf[21] Money & Macro, https://www.youtube.com/watch?v=1ts5wJ6OfzA&t=572s[22] Miran, Stephen. "A User's Guide to Restructuring the Global Trading System." November 2024. Hudson Bay Capital. https://www.hudsonbaycapital.com/documents/FG/hudsonbay/research/638199_A_Users_Guide_to_Restructuring_the_Global_Trading_System.pdf[23] Miran, Stephen. "A User's Guide to Restructuring the Global Trading System"... op.cit.[24] Zongyuan Zoe Liu, "Why the Proposed Mar-a-Lago Accord May Not be the Magic Wand That Trump Is Hoping For", 9  April 2025. https://www.cfr.org/blog/why-proposed-mar-lago-accord-may-not-be-magic-wand-trump-hoping  [25] Treasury Secretary Scott Bessent Breaks Down Trump's Tariff Plan and Its Impact on the Middle Class. https://www.youtube.com/watch?v=zLnX1SQfgJI[26] Park, Thomas. https://www.linkedin.com/feed/update/urn:li:activity:7316122202846765056/[27] See more at: https://ec.europa.eu/eurostat/fr/web/products-eurostat-news/w/ddn-20250311-1[28] See more at: https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/china_en[29] Kar, Jeet. "The EU and India are close to finalising a free trade agreement. Here's what to know." World Economic Forum. March 7 2025. https://www.weforum.org/stories/2025/03/eu-india-free-trade-agreement/[30] See more at: https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/china_en[31] "The paradoxical relationship between the EU and China'. Eastminster: a global politics & policy blog, University of East Anglia. http://www.ueapolitics.org/2022/03/29/the-paradoxical-relationship-between-the-eu-and-china/[32] Vasselier, Abigaël. "Relations between the EU and China: what to watch for in 2024". January 25 2025. https://merics.org/en/merics-briefs/relations-between-eu-and-china-what-watch-2024 [33] Benner, Thorsten. "Europe Is Disastrously Split on China." Foreign Policy, April 12 2023. https://foreignpolicy.com/2023/04/12/europe-china-policy-brussels-macron-xi-jinping-von-der-leyen-sanchez/[34] Chen, D., N. Godehardt, M., Mayer, X., Zhang. 2022. "Europe and China at a Crossroads." 2022. https://thediplomat.com/2022/03/europe-and-china-at-a-crossroads.[35] Sharshenova, A. and Crawford. 2017. "Undermining Western Democracy Promotion in Central Asia: China's Countervailing Influences, Powers and Impact." Central Asian Survey 36 (4): 453. https://doi.org/10.1080/02634937.2017.1372364.[36] See more at: https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/india_en[37] See more at: https://digital-strategy.ec.europa.eu/en/news/key-outcomes-second-eu-india-trade-and-technology-council[38] Kar, Jeet. "The EU and India are close to finalising a free trade agreement. Here's what to know"… op. cit.[39] Malaponti, Chiara. 2024. “Rebooting EU-India Relations: How to Unlock Post-Election Potential.” https://ecfr.eu/article/rebooting-eu-india-relations-how-to-unlock-post-election-potential/.[40] Sinha, Aseema, and Jon P. Dorschner. 2009. “India: Rising Power or a Mere Revolution of Rising Expectations?” Polity 42 (1): 74. https://doi.org/10.1057/pol.2009.19.[41] Chandrasekar, Anunita. 2025. “It’s Time to Upgrade the EU-India Relationship.” https://www.cer.eu/insights/its-time-upgrade-eu-india-relationship.[42] Gare, Frédéric and Reuter Manisha. “Here be dragons: India-China relations and their consequences for Europe”. 25 May 2023. https://ecfr.eu/article/here-be-dragons-india-china-relations-and-their-consequences-for-europe/

Energy & Economics
US - 11.14.2024:

The Economic Impacts of Trump Administration's Tariffs

by World & New World Journal Policy Team

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском I. Introduction  We are only two and a half months into the new Trump administration. However, President Donald Trump's long-threatened tariffs have plunged the country into a trade war abroad. On-again, off-again, new tariffs continue to escalate uncertainty around the world. Trump already launched a trade war during his first term in office, but he has more sweeping tariff plans right now. The second Trump administration has embarked on a new and more aggressive tariff policy, citing various economic and national security concerns. His administration has proposed, imposed, suspended, revoked, and then reimposed various new tariffs. It could be difficult for average citizens to keep up with all the proposals. As of March 19, 2025, there are ten proposed or active tariff initiatives. They range from broad-based tariffs that cover all goods from a certain country (China, Mexico, Canada) to tariffs that cover certain types of goods (aluminum & steel), promises of future tariffs (copper, lumber, automotive, semiconductor, and pharmaceutical), and promised retaliatory tariffs (European wine and other alcoholic beverages). Moreover, although we have seen more tariff announcements in the first two months of the second Trump administration than in the entire first Trump administration, "fair and reciprocal" tariff rollout will overpower the tariffs imposed until today. The ten tariff initiatives that are proposed or in play are as follows in Table 1.   This paper aims to evaluate economic impacts of tariffs imposed by the Trump administration. It first explains the effects of tariffs imposed by the first Trump administration and then forecasts the impacts of the second Trump administration's tariffs.  II. Literature on Tariff Effects A tariff is a type of tax that a government adds to imported goods. Companies importing goods pay the tariff to the government. If any part of a product arrives with a tariff, whether it is an imported avocado or a car built locally with imported steel, its cost is part of the price everyday consumers pay before sales tax.  Economists reject tariffs as an effective tool to improve the welfare of U.S. citizens or strengthen key industries. In a survey conducted during the first Trump administration, 93 % of economic experts did not agree that targeted tariffs on aluminium and steel would improve Americans' welfare. Recent research has strengthened economists' opposition to this policy instrument. Numerous studies demonstrate that American consumers entirely bear the burden of tariffs imposed during the first Trump administration, with disproportionately large impacts on lower-income U.S. households. A framework for analysing the impact of higher import tariffs on the economy is provided by Mundell and Fleming. Mundell (1961) claimed that the country that raised tariffs on imported products may benefit because more people choose domestically produced products over imported ones. Protection from foreign competition could also benefit domestic industries. Large countries can also benefit from improved terms of trade. However, increased tariffs on imported products are assumed to lead to an increase in the current account balance by increasing savings relative to investment. Higher savings dampen aggregate demand. The situation of households deteriorates because of rising consumer prices. Domestic industries are also negatively affected by lower household demand and the need to pay more for imported input products.  Over the years, Mundell and Fleming's model has been developed further by other scholars such as Eichengreen (1981), Krugman (1982), Obstfeld and Rogoff (1995) and Eichengreen (2018). Overall, the theoretical literature demonstrates that higher import tariffs could affect the economy through various channels. The impacts of tariffs on the economy differ between a nation imposing the tariffs and nations exporting to the nation raising the tariffs. However, nations that are not subject to the increased import duties are also affected. Main effects of higher tariffs are as follows: Higher inflation: Higher import tariffs lead to higher prices for imported products. Depending on which tariffs are increased, this could lead to higher prices for both consumers and companies. Domestic firms may also raise their prices because of reduced competition from foreign companies (Cavallo et al. (2021)).  Higher consumer prices lead to a decline in real disposable household income, which hampers private consumption. Higher business costs have impacts on companies' profits, which in turn dampen employment and companies' willingness to invest. Companies are also more likely to pass on some of their higher costs to consumers in the form of higher prices. The rise in imported prices might be smaller in large countries, as they are more able to influence the world price of products. Increased consumption of other products: Higher imported prices can lead companies and consumers to increasingly buy cheaper domestic products. But it can also lead to increased imports of products from countries not subject to higher import tariffs.  Domestic industries are protected: Higher import tariffs improve the competitive position of domestic companies. These benefits can lead to increased investment, production, and employment in protected industries. However, the longer-term effect of protecting some domestic industries from foreign competition can be negative, as it might reduce incentives to improve production efficiency, thereby dampening productivity and GDP.  Decreased trade: Increased tariffs usually lead to reduced trade. This can lead to reduced knowledge transfer between nations in the form of less direct investment, reduced technology transfer, and reduced access to skilled labour. These factors in turn can lead to companies moving further away from the technological frontier, thereby hampering productivity (Dornbusch (1992) and Frankel and Romer (1999)).  Stronger exchange rate: When demand changes from foreign to domestic production, the exchange rate tends to rise to balance it out. One reason is that higher inflation often leads to higher interest rates relative to other nations. The nominal exchange rate might appreciate if imports decline significantly and demand for foreign currency drops. An appreciation of the exchange rate hampers exports but keeps imports cheaper.  Global value chains: Higher tariffs can lead to disruptions in global value chains by making imported inputs from abroad pricier. If firms are part of global value chains, higher costs for firms facing higher import costs may also lead to higher costs for domestic firms further down the production chain.  Uncertainty and confidence: Higher import tariffs may increase uncertainty about future trade policy and lead to increased pessimism among households and companies. Such uncertainty may hamper household consumption and business investment (Boer and Rieth (2024)).  III. Tariffs under the first Trump administration The first Trump administration's tariffs involved protectionist trade initiatives against other nations, notably China.  In January 2018, the Trump administration-imposed tariffs on solar panels and washing machines of 30–50%. In March 2018, the administration-imposed tariffs on aluminium (10%) and steel (25%), which are imported from most countries. In June 2018, the Administration expanded these tariffs to include the EU, Mexico, and Canada. The Trump administration separately set and escalated tariffs on products imported from China, leading to a trade war between the U.S. and China.  In their responses, U.S. trading partners imposed retaliatory tariffs on U.S. products. Canada imposed matching retaliatory tariffs on July 1, 2018. China implemented retaliatory tariffs equivalent to the $34 billion tariff imposed on it by the U.S. In June 2019, India imposed retaliatory tariffs on $240 million worth of U.S. products.  However, tariff negotiations in North America were under way and successful, with the U.S. lifting steel and aluminium tariffs on Mexico and Canada on May 20, 2019. Mexico and Canada joined Argentina and Australia, which were the only countries exempted from the tariffs. But on May 30, Trump announced on his own that he would put a 5% tariff on all imports from Mexico starting on June 10, 2019. The tariffs would go up to 10% on July 1, and then by another 5% every month for three months, until illegal immigrants stopped coming through Mexico and into the U.S. Then the tariffs were averted on June 7 after negotiations between the U.S. and Mexico. U.S. tariffs on Chinese products had been applied as follows: On March 22, 2018, Trump signed a memorandum under Section 301 of the Trade Act of 1974 to apply tariffs of $50 billion on Chinese products. In response, China announced plans to implement its tariffs on 128 U.S. products. 120 of those products, such as fruit and wine, will be taxed at a 15% duty, while the remaining eight products, including pork, will receive a 25% tariff. China implemented their tariffs on April 2, 2018.  On April 3, 2018, the U.S. Trade Representative's office (the USTR) published an initial list of 1,300+ Chinese products to impose levies upon products like flat-screen televisions, medical devices, aircraft parts and batteries. On April 4, 2018, China's Customs Tariff Commission of the State Council decided to announce a plan to put 25% more tariffs on 106 U.S. goods, such as soybeans and cars.  In the response, On April 5, 2018, President Trump directed the USTR to consider $100 billion in additional tariffs. On May 9, 2018, China cancelled soybean orders exported from the United States to China. On June 15, 2018, President Trump released a list of Chinese products worth $34 billion that would face a 25% tariff, starting on July 6. Another list with $16 billion of Chinese products was released, with an implementation date of August 23.  On July 10, 2018, in reaction to China's retaliatory tariffs that took effect July 6, the USTR issued a proposed list of Chinese products amounting to an annual trade value of about $200 billion that would be subjected to an additional 10% in duties. During the G20 summit in Japan in June 2019, the U.S. and China agreed to resume stalled trade talks, with Trump announcing he would suspend an additional $300 billion in tariffs that had been under consideration. IV. Economic Effects of the Tariffs from the First Trump Administration Changes in tariffs affect economic activity directly by influencing the price of imported products and indirectly through changes in exchange rates and real incomes. The extent of the price change and its impact on trade flows, employment, and production in the United States and abroad depend on resource constraints and how various economic actors (producers of domestic substitutes, foreign producers of the goods subject to the tariffs, producers in downstream industries, and consumers) respond as the effects of the increased tariffs reverberate throughout the economy. According to the U.S. Congressional Research Service (CRS), the following six outcomes came out at the level of individual firms and consumers as well as at the level of the national economy. 1. Increased costs for U.S. consumers Higher tariff rates lead to price increases for consumers of products subject to the tariffs and for consumers of downstream products as input costs rise. Higher prices in turn lead to decreased consumption, depending on consumers' price sensitivity for a particular product. For example, consider the monthly price of U.S. laundry equipment, which includes washing machines subject to tariff increases as high as 50% since February 2018. The monthly price of this equipment increased by as much as 14% in 2018 compared to the average price level in 2017, before the tariffs took effect (see Figure 1).   Figure 1: U.S. laundry equipment prices According to Jin (2023), many companies passed the costs of the Trump tariffs on to consumers in the form of higher prices. Following impositions of the tariffs on Chinese products, the prices of U.S. intermediate goods rose by 10% to 30%, an amount equivalent to the size of the tariffs. An April 2019 working paper by Flaaen, Hortaçsu, and Tintel not found that the tariffs on washing machines caused the prices of washers to rise by approximately 12% in the United States. A Goldman Sachs analysis by Fitzgerald in May 2019 found that the consumer price index (CPI) for tariffed products had increased dramatically, compared to a declining CPI for all other core goods. According to the Guardian, the Budget Lab at Yale University found that American consumer prices could rise by 1.4% to 5.1% if Trump implemented his comprehensive tariff plan, which would amount to an additional $1,900 to $7,600 per household. 2. Decreased domestic demand for imported goods subject to the tariffs and less competition for U.S. producers of substitute goods: U.S. producers competing with the imported products subject to the tariffs (e.g., domestic aluminium and steel producers) may benefit to the degree they are able to charge higher prices for their domestic products and may expand production because of increased profitability. Since March 2018, U.S. imports of steel and aluminium have faced additional tariff charges of 25% and 10%, making foreign supplies of these products more expensive relative to domestic products. Because of these tariffs, U.S. imports of these goods went down in 2018 and 2019 compared to what they were usually like in 2017 before the tariffs, while U.S. production went up (see Figure 2 and Figure 3). By the first quarter of 2020, real U.S. imports of steel and aluminium (adjusted for price fluctuations) had decreased by more than 30% and 16%, respectively, from their average 2017 levels. The quarterly production of steel and aluminium in the U.S. during this period, however, increased by as much as 13.5% and 9.0%, respectively, above average 2017 levels.   Figure 2: Domestic production and imports: Steel  Figure 3: Domestic production and imports: Aluminium 3. Increased costs for U.S. producers in downstream industries, resulting in a decline in employment U.S. producers that use imported products subject to the additional tariffs as inputs ("downstream" industries, such as auto manufacturers in the case of the aluminium and steel tariffs) might be harmed as their costs of production increase. Higher input costs are more likely to lead to some combination of lower profits for producers, which in turn might dampen demand for these downstream products, leading to some contraction in these sectors.  A study (2019) by Federal Reserve Board economists Flaaen and Pierce, which examined effects on the manufacturing sector from all U.S. tariff actions in 2018, found that higher input costs from the tariffs were associated with higher prices, employment declines, and reductions in output for affected firms. Another study (2020) by Handley, Kamal, and Monarch found that the higher input costs associated with the tariffs might have led to a decrease in U.S. exports for firms reliant on imported intermediate inputs. Handley, Kamal, and Monarch suggested that export growth was approximately 2% lower for products made with products subject to higher U.S. tariffs, relative to unaffected products. Another study (2019) by Federal Reserve Board economists Flaaen and Pierce found that the steel tariffs led to 0.6% fewer jobs in the manufacturing sector than would have happened in the absence of the tariffs; this cut amounted to approximately 75,000 jobs. A study (2024) by Ma and David concluded that the United States lost 245,000 jobs because of the Trump tariffs.  4. Decreased demand for U.S. exports subject to retaliatory tariffs  Retaliatory tariffs place U.S. exporters at a price disadvantage in export markets relative to competitors from other countries, potentially decreasing demand for U.S. exports to those markets. Since Q3 2018, after Section 232 retaliatory tariffs took effect in China, the EU, Russia, and Türkiye, U.S. exports to these trading partners subject to the tariffs declined by as much as 44% below their 2017 average values (Figure 4). U.S. exports to China subject to retaliation during the same period declined even further from their 2017 levels, falling as much as 68% on a quarterly basis. By contrast, during this same period, overall U.S. exports were as much as 10% higher each quarter relative to 2017, suggesting the retaliatory tariffs played a role in the product-specific export declines.  Figure 4: Declines in U.S. exports subject to retaliation A study by Fajgelbaum, Goldberg, Kennedy, and Khandelwal published in the Quarterly Journal of Economics in October 2019 estimated that consumers and firms in the U.S. who buy imports lost $51 billion (0.27% of GDP) because of the 2018 tariffs. This study also found that retaliatory tariffs resulted in a 9.9% decline in U.S. exports. This study also found that workers in counties with a lot of Republicans were hurt the most by the trade war because agricultural products were hit the hardest by retaliatory tariffs.  5. U.S. National Economy In addition to industry- or consumer-level effects, tariffs also have the potential to affect the broader U.S. national economy. Quantitative estimates of the effects vary based on modelling assumptions and techniques, but most studies suggest a negative overall impact on U.S. GDP because of the tariffs.  The Congressional Budget Office (2020) estimated that the increased tariffs in effect as of December 2019 would reduce U.S. GDP by 0.5% in 2020, below a baseline without the tariffs, while raising consumer prices by 0.5%, thereby reducing average real household income by $1,277. From a global perspective, the International Monetary Fund estimated that the tariffs would reduce global GDP in 2020 by 0.8%. Dario Caldara et al. (2020) also found that in 2018, investment dropped by 1.5% because of the uncertainty caused by U.S. trade policy. Moreover, a study (2019) by Amiti, Redding, and David published in the Journal of Economic Perspectives found that by December 2018, Trump's tariffs resulted in a reduction in aggregate U.S. real income of $1.4 billion per month in deadweight losses and cost U.S. consumers an additional $3.2 billion per month in added tax. Furthermore, Russ (2019) found that tariffs, which Trump imposed through mid-2019, combined with the policy uncertainty they created, would reduce the 2020 real GDP growth rate by one percentage point.  6. Trade balance  The Trump administration repeatedly raised concerns over the size of the U.S. trade deficit, thereby making trade deficit reduction a stated objective in negotiations for new U.S. trade agreements. Broad-based tariff increases affecting a large share of imports may reduce imports initially, but they are unlikely to reduce the overall trade deficit over the longer period due to at least two indirect impacts that counteract the initial reduction in imports. One indirect effect is a potential change in the value of the U.S. dollar relative to foreign currencies. Another potential effect of U.S. import tariffs is retaliatory tariffs. Economists argue that while tariffs placed on imports from a limited number of trading partners may reduce the bilateral U.S. trade deficit with those specific nations, this is likely to be offset by an increase in the trade deficit or reduction in the trade surplus with other nations, leaving the total U.S. trade deficit largely unchanged.  Figure 5 shows the relative change in the U.S. goods trade deficit with the world as well as the bilateral U.S. deficits with three major partners, China, Mexico, and Vietnam, from 2017 to 2019. Since the U.S. tariffs took effect, the overall U.S. trade deficit has increased, rising 8% from 2017 to 2019. However, the U.S. trade deficit in goods with China declined by 8% from 2017 to 2019, while the U.S. trade deficit in goods with Vietnam and Mexico significantly increased by more than 40% during the same period.  Figure 5: Changes in the U.S. goods trade deficits with China, Mexico, and Vietnam According to Zarroli (2019), between the time Trump took office in 2017 and March 2019, the U.S. trade deficit increased by $119 billion, reaching $621 billion, the highest it had been since 2008. American Farm Bureau Federation data showed that agriculture exports from the U.S. to China decreased from $19.5 billion in 2017 to $9.1 billion in 2018, a 53% reduction.  V. What are the Potential Consequences of Trump's Tariff Plan? Last year, the Peterson Institute for International Economics examined the impact of President Trump's proposed tariffs based on his campaign promises, which would impose 10 % additional tariffs on US imports from all sources and 60 % additional tariffs on imports from China. The major outcomes were lower national income, lower employment, and higher inflation. McKibbin, Hogan, and Noland (2024) at the Peterson Institute for International Economics found that both of Trump's tariff plans—imposing 10% additional tariffs on U.S. imports from all sources and 60% additional tariffs on imports from China—would reduce both U.S. real GDP and employment by 2028. But the former proposal damages the U.S. economy more than the latter. If other nations retaliate with higher tariffs on their imports from the U.S., the damage intensifies.  Assuming other governments respond in kind, Trump's 10 % increase results in U.S. real GDP that is 0.9 % lower than otherwise by 2026, and U.S. inflation rises 1.3 % above the baseline in 2025.  The 10 % added tariffs hurt the economies of Canada, Mexico, China, Germany, and Japan—all major US trading partners that see a lower GDP relative to their baselines through 2040. Mexico and Canada take much larger GDP hits than the U.S. The 60 % added tariffs on imports from China reduce its GDP relative to its baseline, much more than that of other U.S. trading partners. Mexico, however, sees a higher GDP than otherwise as some production shifts to Mexico from China. This paper focuses on Trump's universal 10 % tariffs rather than 60 % tariffs on imports from China because extreme 60 % tariffs on Chinese imports are not expected. McKibbin, Hogan, and Noland (2024) assume the 10 % tariff increase is implemented in 2025 and remains in place through the forecast period. They also consider a second scenario in which U.S. trading partners retaliate with equivalent tariff increases on products they import from the U.S.  Figures 6–11 show the results for the uniform additional 10 % increase in the tariff on imports of goods and services from all trading partners.   Figure 6: Projected change in real GDP of selected economies from an additional 10 % increase in US tariffs on imports of goods and services from all trading partners, 2025-40 (Source: McKibbin, Hogan, and Noland, 2024) When tariffs go up by 10%, the U.S. real GDP goes down by 0.36 % by 2026, and it goes down even more in Mexico and Canada by 2027 (see Figure 6). Chinese GDP drops by 0.25 % below the baseline in 2025. After the initial demand-induced slowdown, U.S. GDP recovers as production shifts from foreign suppliers to U.S. suppliers, leading to a slightly lower long-term GDP of 0.1 % below baseline by 2030 in the U.S.   Figure 7: Projected change in employment (hours worked) in selected economies from an additional 10 % increase in US tariffs on imports of goods and services from all trading partners, 2025-40 (Source: McKibbin, Hogan, and Noland, 2024) The results for aggregate employment are like the GDP outcomes (see figure 7). Employment drops in the United States by 0.6 % by 2026 but recovers due to a supply relocation towards U.S. suppliers. U.S. employment returns to baseline eventually because real wages decline permanently to bring employment back to baseline by assumption.  Figure 8: Projected change in inflation in selected economies from an additional 10% increase in US tariffs on imports of goods and services from all trading partners, 2025-40 (Source: McKibbin, Hogan, and Noland, 2024) The imposition of higher tariffs increases prices of both consumer and intermediate goods, contributing to a rise in inflation of 0.6 % above baseline in 2025 (see figure 8).  The higher tariff is inflationary everywhere except in China due to the tightening of Chinese monetary policy to resist change in the exchange rate relative to the U.S. dollar.   Figure 9: Projected change in the trade balance in selected economies from an additional 10 % increase in US tariffs on imports of goods and services from all trading partners, 2025-40 (Source: McKibbin, Hogan, and Noland (2024)) Figure 9 shows the change in the trade balance as a share of GDP. In theory, the trade balance can worsen or improve due to changes in exports and imports. From 2025 to 2028, the U.S. trade deficit narrows slightly but then widens as capital flows into the U.S. economy, appreciating the U.S. real effective exchange rate. By 2030, the U.S. trade deficit will worsen by 0.1 % of GDP due to capital moving from Mexico and Canada into the U.S. Government savings rise due to additional tariff revenues.  VI. Conclusion  This paper showed that tariffs imposed by the first Trump administration had negative impacts on the U.S. economy, particularly inflation, incomes, and employment. It also demonstrated that tariffs which will be imposed by the second Trump administration are expected to have negative effects on the U.S. economy. Then a question arises: "Why does Trump attempt to impose tariffs on products from abroad?" Today, more people mention tariffs as tools to protect U.S. companies and farmers. They are discussed as a tool for bringing back manufacturing businesses into the U.S. as well as a bargaining tactic in negotiations over the flow of fentanyl and immigration. Trump has used and promised to increase tariffs for three purposes: to raise revenue, to bring trade into balance, and to bring rival countries to heel. It is unclear whether Trump will achieve his goals. However, President Donald Trump believes that tariffs are a panacea. Trump believes that his tariffs would bring hundreds of billions—trillions— into the US Treasury. Moreover, Trump is confident that he can force countries to give up something he believes is in America's best interest. For example, his tariffs on Canada and Mexico have led Mexico and Canada to agree to expand their border patrols. Reference  Amiti Mary, Redding Stephen, David E, “The Impact of the 2018 Tariffs on Prices and Welfare,” Journal of Economic Perspectives. 33 (Fall 2019): 187–210. Boer, L. and M. Rieth, “The Macroeconomic Consequences of Import Tariffs and Trade Policy Uncertainty,” IMF Working Paper 2024/013, International Monetary Fund. Cavallo, A., G. Gopinath, B. Neiman, and J. Tang (2021), “Tariff Pass-Through at the Border and at the Store: Evidence from US Trade Policy,” American Economic Review: Insights 3(1): 19-34.  Congressional Budget Office, The Budget and Economic Outlook: 2020 to 2030, January 28, 2020. https://www.cbo.gov/system/files/2020-01/56020-CBO-Outlook.pdf.  Dario Caldara et al., “The Economic Effects of Trade Policy Uncertainty,” Journal of Monetary Economics, vol. 109 (January 2020), pp. 38-59. Dornbusch, R. (1992), “The Case for Trade Liberalization in Developing Countries,” Journal of Economic perspectives 6 (1): 69-85.  De Loecker, J., P.K. Goldberg, A.K. Khandelwal and N. Pavcnik (2016), “prices, markups, and trade reform,” Econometrica 84(2): 445-510.  Eichengreen, B. (1981), “A Dynamic Model of Tariffs and Employment under Flexible Exchange Rates,” Journal of International Economics 11:341-359.  Eichengreen, B. (2018), “Trade Policy and the Macroeconomy,” Keynote address Mun dell-Fleming Lecture, International Monetary Fund, 13 March 2018.  Fajgelbaum, P.D., P.K. Goldberg, P.J. Kennedy and A.K. Khandelwal (2019), “The Return to Protectionism,” The Quarterly Journal of Economics 135(1): 1-55.  Fitzgerald, Maggie, “This Chart from the Goldman Sachs Shows Tariffs are Rasing Prices for Consumers and It could Get Worse.” CNBC. May 13, 2019. Flaaen, A. and J.R. Pierce (2019), “Disentangling the effects of the 2018-2019 tariffs on globally connected U.S. Manufacturing sector,” Working Paper, Finance Economic Discussion Series 2019-086, Board of Governors Federal Reserve System, Washington DC.  Flaaen, A., A. Hortacsu and F. Tintelnot (2020), “The production relocation and price effects of US trade policy: the Case of Washing Machines,” American Economic Review 110(7): 2103-2127.  Frankel, J.A. and D.H. Romer (1999), “Does Trade Cause Growth,” American Economic Review 89 (3): 379-399. Handley, K., F. Kamal, and R. Monarch (2020), “Rising Import Tariffs, Falling Export Growth: When Modern Supply Chains Meet Old-Style Protectionism,” NBER Working paper 26611. https://www.nber.org/papers/w26611. Handley, K. and N. Limao (2022), “Trade Policy Uncertainty,” NBER Working Paper 29672.  Handley, Kyle, Fariha Kamal, and Ryan Monarch, “Rising Import Tariffs, Falling Export Growth: When Modern Supply Chains Meet Old-Style Protectionism,” National Bureau of Economic Research, NBER Working Paper No. 26611, January 2020. Jin, Keyu (2023). The New China Playbook: Beyond Socialism and Capitalism. New York: Viking. Kreuter, H. and M. Riccaboni (2023), “The Impact of Import Tariffs on GDP and Consumer Welfare: A Production Network Approach,” Journal of Economic Modelling 126.  Krugman, P. (1982), “The Macroeconomics of Protection with a Floating Exchange rate,” Carnegie-Rochester Conference Series on Public Policy 16: 141-182.  Ma, Xinru; Kang, David C. (2024). Beyond Power Transitions: The Lessons of East Asian History and the Future of U.S.-China Relations. Columbia Studies in International Order and Politics. New York: Columbia University Press.  McKibbin, W., M. Hogan, and M. Noland (2024), “The International Economic Implications of a Second Trump Presidency,” Peterson Institute for International Economics, Working Paper 24-20.  Mundell, R. (1961), “Flexible Exchange Rates and Employment Policy,” Canadian Journal of Economics and Political Science 27: 509-517.  Obstfeld, M., and K. Rogoff (1995), “Exchange Rate Dynamics Redux,” Journal of Political Economy, 103: 624-660.  Russ, Katheryn (December 16, 2019). “What Unilateralism Means for the Future of the U.S. Economy,” Harvard Business Review. January 2, 2020.  Zarroli, Jim. “Despite Trump’s Promises, The Trade Deficit is Only Getting Wider,” NPR. March 6, 2019.

Energy & Economics
The oil industry of Russia. Oil rigs on the background of the Russian flag. Mining in Russia. Russian oil export. Russia in the global fuel market. Fuel industry.

The Economic Impacts of the Ukraine War: focus on Russian Energy

by World & New World Journal Policy Team

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском I. Introduction Russia invaded Ukraine in February 2022. As the invasion enters its third year, its most immediate and visible consequences have been loss of life and large numbers of refugees from Ukraine. However, given the interconnected structure of the international political, economic, and policy systems, the ramifications of the conflict can be felt well beyond Ukraine and Russia.Much of the recent literature and commentaries have focused on the military and strategic lessons learned from the ongoing Ukraine conflict (Biddle 2022; 2023; Dijkstra et al. 2023). However, the conflict has potentially much wider global consequences for various policy areas. Robert Jervis noted that the international system is not only interconnected but also often displays nonlinear relationships and that “outcomes cannot be understood without adding together the units or their relations.” (Jervis 1997, 6).  This article focuses on the economic effects of the Ukraine war, emphasizing the energy issue, because Russia has been a major player in the global energy market.  II. Literature on the effects of wars Wars have the potential to alter the parties and “transform the future” of belligerents (Ikle 1991), they also bring about fundamental changes to the international system (Gilpin 1981).  Scholars in Economics have provided considerable analysis of the macroeconomic effects of a conflict across spatial levels: locally, nationally, regionally and internationally. Studies have examined the effects of specific wars such as the Syrian civil war (Kešeljević and Spruk, 2023) or the Iraq war (Bilmes and Stiglitz 2006). They have also examined the effects of war in general. For instance, Reuven Glick and Alan Taylor (2010) examine bilateral trade relations from 1870 to 1997 and find “large and persistent impacts of wars on trade, and hence on national and global economic welfare.” Similarly, Vally Koubi (2005) investigates the effects of inter- and intrastate wars on a sample of countries and finds that the combined pre-war contemporaneous and postwar effects on economic growth are negative.  A “war ruin” school emphasizes that the destruction caused by wars is accompanied by higher inflation, unproductive resource spending on the military, and war debt (Chan 1985; Diehl and Goertz 1985; Russett 1970). By contrast, a “war renewal” school argued that there could be longer-term positive economic effects from war because war can lead to increased efficiency in the economy by reducing the power of rent-seeking special interests, triggering technological innovation, and advancing human capital (Olson 1982; Organski and Kugler 1980). Early analysis estimated that the Russian invasion of Ukraine had an economic cost of 1% of global GDP in 2022 (Liadze et al. 2023)Some political scientists focused on the domestic consequences of war. For example, Electoral political scientists have often examined the effects of war on public opinion. A key concern has been whether war produces a “rally around the flag effects” to bolster the support of incumbent leaders – or whether war weariness can contribute to declining support for governments, including those governments committed to conflicts abroad. John Mueller (1970) was the first scholar to develop the concept of the “rally-round-the-flag”, with later scholars identifying some of the factors that may shape or mitigate the effect (Dinesen and Jaeger 2013). Kseniya Kizilova and Pippa Norris (2023) considered any rally effects during the first few months of the Ukraine war. They claim that the reason that motivated Putin’s military invasion was an attempt to boost popular support among the Russian electorate. They show evidence of a surge in support for Putin following the invasion, which persisted longer than usual in democratic systems. However, Kizilova and Norris question whether this will likely be sustained as the economic costs of the war increase.   III. Brief Summary of the Ukraine War The roots of the Ukraine war go back to the early 1990s when Ukraine declared independence from the Soviet Union. While the Ukrainian economy was still firmly tied to the Russian economy, the country shifted its political focus towards the EU and NATO. This shift culminated in the Orange Revolution 2004 and the “Euromaidan” demonstrations in 2013. Portraying the “Euromaidan” protests as a Western-backed coup, Russia invaded Crimea and declared the annexation of Crimea into Russia in March 2014. Conflict soon erupted in the Eastern regions of Donetsk and Luhansk, where Russia supported pro-Russian separatist forces (Walker 2023a). Despite attempts to negotiate a ceasefire through the Minsk Agreement I and II, the conflict in the Eastern part of Ukraine had continued (Walker 2023a), resulting in over 14,000 deaths between 2014 and 2021. Against this backdrop, on 21 February, 2022, Russia recognized the independence of Donetsk and Luhansk. Three days later, confounding most Western observer’s expectations, Russia launched a full-scale invasion of Ukraine, calling it a “special military operation”. During the initial weeks, Russia made substantial advances (CIA Fact-book 2024) but failed to take Kyiv in the face of strong Ukrainian resistance supported by Western allies. In October 2022, Russia declared the annexation of Donetsk, Luhansk, Kherson and Zaporizhzhia (even though they were not entirely under Russian control) (Walker 2023b). As of February 2025, the meeting between the US and Russia to end the war is underway. IV. The Effects of the Ukraine war The impacts of war are far-reaching and devastating. War causes immense destruction of property and loss of life. It also creates psychological trauma for those who have experienced it firsthand. War can also have long-term economic impacts, such as increased unemployment and poverty. War can also lead to the displacement of people, as we have seen the millions of refugees who have been forced to flee their homes due to conflicts. War can also have political effects, such as creating new states or weakening existing nations. It can also lead to the rise of authoritarian regimes in many post-war nations. War can also increase militarization as nations seek to protect themselves from future conflicts.  Regarding the effects of the Ukraine war, Bin Zhang and Sheripzhan Nadyrov (2024) claimed that in addition to inexpressible human suffering and the destruction of infrastructure, the economic and financial damage inflicted on European countries would be profound, especially in the context of rising inflation. The positive changes due to the conflict may occur in four areas: acceleration of the Green Deal, increased European attention to defense, improved prospects for individual countries to join the European Union (EU), and the unfolding of broader Eurasian economic integration.  The Ukraine war might have broader economic consequences. The supply chains may be affected because of the destruction of infrastructures and resources. War mobilization may affect the workforce and economic production. Actors in the economy may also act strategically to deploy resources elsewhere, to support the war effort or because the war has affected incentive structures or decide to cease production altogether because of expected losses. These effects can be local to geographical areas engulfed in conflict but also cause ripple effects to a broader regional area and the global economy. Trade, production, consumption, inflation, growth and employment patterns may all be influenced.  Figure 1: Global implications of the Russian invasion of Ukraine for the European and World Economies. Source: Peterson K. Ozili. (2022)  Ozili (2022) claimed that the scale of the Ukraine war had a negative impact on the economies of almost all countries around the world. As Figure 1 shows, the main effects of the Ukraine war on the global economy are: Rising Oil and Gas Prices – European countries import about a quarter of their oil and 40% of their natural gas from the Russian Federation. The Russian Federation is the second largest oil producer in the world and the largest supplier of natural gas to Europe. After the invasion, European oil companies will have problems getting these resources from the Russian Federation. Even before the Russian invasion, oil prices rose because of growing tensions between countries, the COVID-19 pandemic, and other factors, but remained in the $80–95 per barrel range. After the invasion, this price reached $100 and could reach $140. Natural gas prices have risen 20% since the war began. Rising gas prices can drive high inflation and increase public utility bills.  Decline in production and economic growth, rising global inflation, and the cost of living are more related to the consequences of the above-mentioned factors, especially rising oil and gas prices, which lead to high inflation and, therefore, a decline in supply and demand.  Impact on the global banking system: This factor’s negative effect will be felt more strongly by Russian banks and is associated with international financial sanctions. Foreign banks that will suffer significant damage from sanctions are those that have conducted large operations in the Russian Federation.  The Russian Federation’s export ban and its own counter-ban on imports of foreign products disrupted the global supply chain, resulting in shortages and higher prices for imported commodities. As Ozili (2022) claimed, higher inflation is a perceived negative consequence of the Russian invasion of Ukraine. As Figure 2 shows, inflation in the EU jumped in the first month of the invasion, and the increasing trend continues. EU inflation in 2022 peaked in October and amounted to 11.5%, a historical record. However, inflation has slowly declined as energy prices have gone down.  This higher inflation in Europe resulted from an increase in energy prices. As Figures 3, 4, and 5 show, energy prices in Europe skyrocketed in 2022. As Figure 3 shows, energy prices have been the most important component of inflation in the EU. Figure 2: Average inflation rate in the EU (%). Source: EurostatCreated with Datawrapper   Figure 3: Main components of inflation rate in the Euro areas.  Figure 4: Natural gas prices in Europe, January 2021- end 2024  Figure 5: Crude oil price, January 2020-January 2025 Source: Eurostat Created with Datawrapper As Figure 6 shows, the inflation rate in major EU countries such as Germany and France followed the pattern of EU countries in which inflation skyrocketed in 2022 and then slowly declined over time. Figure 6: Inflation rate in major EU countries. Source: Eurostat Created with Datawrapper  As Ozili claimed, a lower growth rate was also a perceived negative consequence of the Russian invasion of Ukraine. As Figure 7 shows, GDP in the EU was down to 3.5 % in 2022 compared to 6.3% in 2021, and it was further down to 0.8 % in 2023 because economic stagnation and high inflation caused by the Ukraine war impacted European economies. The European Commission forecasts that the European economy will grow by 0.9 % in 2024 and 1.5% in 2025.  Figure 7: Average annual GDP growth rate in EU, 1996-2025. Following the pattern of entire EU countries, growth rates in four big European countries declined in 2022 & 2023 after Russia invaded Ukraine in February 2022 and are expected to grow moderately in 2024. The growth rates in four big European countries are in Table 1 and Figures 8-11.    Figure 8: Growth rate in Germany  Figure 9: Growth rate in France  Figure 10: Growth rate in the UK   Figure 11: Growth rate in Italy    Regarding the effect of the Ukraine war on the global banking system, the effect was minimal because most international financial sanctions targeted Russian banks. The sanctions, including the ban of selected Russian banks from SWIFT, only affected foreign banks with significant operations in Russia. Many foreign banks experienced losses after several Western countries imposed financial sanctions on Russian banks, the Russian Central Bank, and wealthy Russian individuals. The most affected banks were Austria’s Raiffeisenbank, Italy’s Unicredit, and France’s Société Générale. Other foreign banks recorded huge losses when they discontinued their operations in Russia. The losses were significant for small foreign banks and insignificant for large foreign banks.  After almost 20 months into the full-scale war, Ukraine’s banking sector continued demonstrating remarkable resilience and functioning as the backbone of the real economy. No bank runs have occurred, and access to cash was maintained. In addition to crucial reforms since 2014, comprehensive measures by the National Bank of Ukraine and a strong level of digitalization are key reasons for the observed stability. However, a significant liquidity buffer is not only a sign of resilience. It also reveals a lack of lending. The bank loan portfolio declined by around 30% compared to pre-war levels in real terms.  Regarding the impact of the Russian invasion of Ukraine on European stock markets, Figures 12 and 13 show the movement of the FTSE 100 and Euro Area Stock Market Index (EU50). As seen from Figures 12 & 13, after the Russian invasion of Ukraine in February 2022, both indices showed a noticeable decline in 2022, particularly early 2022. However, both indexes showed a noticeable rise after late 2022. Although there were ups and downs in both indices in 2023 and 2024, they show upward movement from 2023 to 2025.  Figure 12: The FTSE 100 index in Europe  Figure 13: Euro Area Stock Market Index (EU50)   Regarding the global supply chain, military operations during the Russian invasion of Ukraine disrupted multiple sectors. In particular, Russia’s ban on exports and retaliatory ban on imports, including its refusal to allow foreign cargoes to pass through its waterways and airspace during the early phase of the invasion, disrupted the global supply chain.  Regarding global supply chain disruption, this article focuses on Russian oil and gas because they are the most important Russian products that affect not only Europe but also the world.  Figures 14 and 15 show a world map of the countries that exported oil and gas to Europe: the color of the country corresponds to the percentage share of the country’s exports (indicated below the Figure). In 2021, around a third of Europe’s energy came from gas (34%) and oil (31%), according to Al Jazeera’s data analysis from BP’s Statistical Review of World Energy. Europe was the largest importer of natural gas in the world. Russia provided roughly 40% and 25% of the EU’s imported gas and oil before the Russian invasion of Ukraine. As Figure 16 shows, major gas importers from Russia in 2021 were European countries. Figure 14: EU oil import sources in 2021. Figure 15: EU natural gas import sources in 2021. Source: Eurostat  Figure 16: Major EU importers from Russian Gas in 2021.  However, since the Russian invasion of Ukraine in 2022, more than 9,119 new economic sanctions have been imposed on Russia, making it the most sanctioned country in the world. At least 46 countries or territories, including all 27 EU nations, have imposed sanctions on Russia or pledged to adopt a combination of US and EU sanctions. The sanctions have strongly affected, resulting in a 58% decline in exports to Russia and an 86% drop in imports from Russia between the first quarter of 2022 and the third quarter of 2024 (see Figure 17). Figure 17: EU trade with Russia  Russia has blamed these sanctions for impeding routine maintenance on its Nord Stream I gas pipeline which is the single biggest gas pipeline between Russia and Western Europe. In response, Russia cut its gas exports to the EU by around 80% since the Russian invasion, resulting in higher gas price in Europe, as Figure 18 shows. As a result, many European countries had to rethink their energy mix rapidly. The ripple effects of higher natural gas prices were felt in Europe and around the world. One of the most immediate consequences of Russia’s cut in gas delivery and sanctions on Russia, as well as sanctions on Russian was a sharp increase in European demand for LNG imports: in the first eight months of 2022, net LNG imports in Europe rose by two-thirds (by 45 billion cubic meters compared with the same period a year earlier).  Russia’s pipeline gas share in EU imports dropped from over 40% in 2021 to about 8% in 2023. Russia accounted for less than 15% of total EU gas imports for pipeline gas and LNG combined. The drop was possible mainly thanks to a sharp increase in LNG imports and an overall reduction in gas consumption in the EU. Figure 18: Natural gas price in Europe, January 2021- December 2024  Figure 19 shows how gas supply to the EU changed between 2021 and 2023. Import from Russia declined from over 150 billion cubic meters (bcm) in 2021 to less than 43 bcm. This was mainly compensated by a growing share of other partners. Import from US grew from 18.9 bcm in 2021 to 56.2 bcm in 2023. Import from Norway grew from 79.5 bcm in 2021 to 87.7 in 2023. Import from other partners increased from 41.6 bcm in 2021 to 62 bcm in 2023. Source: https://www.consilium.europa.eu/en/infographics/eu-gas-supply/#0) Figure 19: Major EU import sources of Gas.  However, as Figure 20, shows the EU’s import from Russian gas increased in volume in 2024.  Figure 20: EU trade of natural gas with Russia     EU imports of Russian petroleum oil also dropped. Russia was the largest provider of petroleum oil to the EU in 2021. After Russia's invasion of Ukraine, a major diversion in the trade of petroleum oil took place. In the third quarter of 2024, the volume of petroleum oil in the EU imported from Russia was 7% of what it had been in the first quarter of 2021 (see Figure 21) while its value had dropped to 10% in the same period.  The EU’s share of petroleum oil imports from Russia dropped from 18% in the third quarter of 2022 to 2% in the third quarter of 2024 (see Figure 22). The shares of the United States (+5 pp), Kazakhstan (+4 pp), Norway (+3 pp), and Saudi Arabia (+2 pp) increased in this period. The U.S. and Norway became the EU’s no.1 and no.2 petroleum oil providers, respectively. Figure 21: EU trade of petroleum oil with Russia    Figure 22: EU’s leading petroleum oil providers  The EU’s de-Russification policy has successfully reduced the EU’s dependence on Russian energy. However, the EU’s de-Russification policy allowed Russian fossil fuels to flow into other regions. The Centre for Research on Energy and Clean Air (CREA), a think-tank in Finland, compiles estimates of the monetary value of Russian fossil fuels procured by each country and region (Figure 23). Figures 23 & 24 show the countries that imported Russian coal, oil and gas since Russia’s invasion of Ukraine. China has been no. 1 country that imported Russian fossil fuels most, followed by India, Turkey, and the EU. Asian countries such as Malaysia, South Korea, Singapore, and Japan are among the major importers of Russian fossil fuels.  Figure 23: Value of Russian fossil fuels purchase (January 1, 2023 to January 24, 2024)  Figure 24: Largest importers of Russian fossil fuels (January 1, 2023 to February 16, 2025)  Moreover, according to Statista, value of fossil fuel exports from Russia from February 24, 2022 to January 27, 2025, by country and type is as follows as Figure 25 shows. China have been no. 1 country that imported Russian fossil fuels most, followed by India, Turkey, Germany, Hungary, Italy, and South Korea. Figure 25: value of fossil fuel exports from Russia from February 24, 2022 to January 27, 2025, by country and type.  However, Figures 23, 24, and 25 show some differences among major importers of Russian fossil fuels. China, India, and Turkey imported more Russian oil than gas or coal, while EU imported more Russian gas than oil or coal. Interestingly, South Korea imported more Russian coal than oil or gas. If we focus on Russian oil, we know that China and India’s imports of Russian oils significantly increased, as shown in Figures 26, 27, and 28. Since the EU imposed its embargo on Russian crude oil shipments, China purchased the most from Russia, at EUR 82.3 billion, followed by India and Türkiye, at EUR 47.0 billion and EUR 34.1 billion, respectively. The EU came in fourth, with oil and gas imports continuing mainly through pipelines to Eastern Europe. Notably, the oil-producing countries of Saudi Arabia and the United Arab Emirates (UAE) purchased oil (crude oil and petroleum products) from Russia.  Figure 26: Russian Oil Exports, by country and region, 2021-2024. (Navy blue: EU, Blue: US & UK, Light green: Turkey, Green: China, Yellow: India, Orange: Middle Eastern nations) Since the advent of the Ukraine crisis, China and India have been increasing the amount of crude oil they imported from Russia. According to statistics compiled by China’s General Administration of Customs, as Figure 27 shows, monthly imports increased from 6.38 million tons in March 2022 to 10.54 million tons in August 2023. Annual imports in 2023 exceeded 100 million tons for the first time.  Figure 27: China’s monthly crude oil imports from Russia (2021 to 2023)   As Figure 28 shows, India, which historically imported little crude oil from Russia, rapidly increased its imports partly due to the close geographical distance since the Russian invasion of Ukraine. According to statistics compiled by India’s Ministry of Commerce and Industry, its imports of Russian crude oil increased from March 2022 onward, with the total amount imported during 2022 exceeding 33 million tons. Crude oil imports from Russia grew into 2023, with monthly imports in May 2023 reaching a record-high level of 8.92 million tons. Annual crude oil imports from Russia in 2023 were expected to be at least 80 million tons. Figure 28: India’s monthly crude oil imports from Russia (January 2021 to November 2023)  In conclusion, after EU ban on Russia until January, 2025, the biggest buyers of Russia’s fossil fuels are as follows as Figure 29 shows: China has been no. 1 country that imported Russian coal, and crude oil the most, while the EU has been the largest importer of Russian Gas, both pipeline and LNG. Figure 29: Which country bought Russia’s fossil fuels after EU ban until January 2025 Still, although the EU has significantly reduced gas imports from Russia since Russia’s invasion of Ukraine, the EU still is no. 1 importer of Russian gas. However, China replaced EU as the biggest buyer of Russian crude oil. China is also the biggest buyer of Russian coal. Data from January 1, 2022 to January 1, 2025 show how Russian fossil fuels have flowed by geography as Figure 30 shows. The flows of Russian energy to EU have significantly declined, while the supply of Russian energy to China, India, and Turkey has significantly increased.  Figure 30: The flows of Russian energy to regions    Despite the EU’s restrictions on Russian-sourced energy, Russia has maintained a substantial revenue level by selling it to other countries. As Figure 31 shows, Russian energy revenues have somewhat declined between January 2022 and January 2025. Russian energy export revenue was a little less than 750 million Euro in January 2025 compared to 1000 million Euro in January 2022 just before the Russian invasion of Ukraine. However, considering that Russia’s total oil and gas revenues were 72.6 billion dollars in 2020, 122.9 billion in 2021, 169.5 billion in 2022, and 102.8 billion in 2023 and that 2022 was the best year for energy revenues in recent years, Russian energy revenues after the Russian invasion of Ukraine in February 2022 was not insufficient. This in turn has blunted the effectiveness of the sanctions imposed by the West.   Figure 31: Russian energy export revenue between 2022 and 2025.  V. Conclusion  This article examined the economic effects of the Ukraine war based on the argument of Ozili (2022). This article investigated four economic aspects (Inflation, economic growth, global banking, and global supply chain) on which the Ukraine war has had impacts. This article focused on Europe and the global supply chain because Russia and Ukraine were parts of Europe and because Russian energy has had a significant impact on Europea and all around the world.  This article showed that the Ukraine war significantly affected European inflation, economic growth, stock markets, and energy markets while the war had minimal impact on global banking. However, this article showed that the economic effects of the Ukraine war on inflation, economic growth, stock markets, and energy markets in Europe were short-term. The oil and gas prices in Europe skyrocketed in 2022 and then declined slowly and continuously. In addition, growth in Europe declined in 2022 & 2023 after Russia invaded Ukraine in 2022 and energy prices jumped up. However, European countries grew moderately in 2024 and are expected to increase in 2025. The same thing happened to European stock markets. The FTSE 100 and Euro Area Stock Market Index (EU50) showed a noticeable decline in 2022, in particularly early 2022. However, both indices showed a noticeable rise after late 2022.  On the other hand, after Russia invaded Ukraine, European countries significantly reduced imports of Russian fossil fuels. The EU’s de-Russification policy allowed Russian fossil fuels to flow into other regions. After EU’s imposition of sanctions on Russian energy, Russian fossil fuels mainly went to Asian and Middle East markets, mainly to China, India, and Turkey. 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Energy & Economics
Microelectronics for European Union. European alliance flag in micro board style. Concept of purchase of microelectronics by countries of European Union. Microelectronics production in EU. 3d image.

Opinion – Europe’s Lagging Position on Microprocessors

by Robert Palmer

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском Valued at over $3 trillion, Nvidia, the world’s largest market capitalisation, exemplifies the transformative power of the microprocessor sector, but Europe’s lagging position raises significant concerns about sovereignty and competitiveness. Some companies are stepping up, offering concrete responses to these challenges and heralding a new era for European innovation in microprocessors. European socio-economic stability depends on it. A new era is fast approaching, with the US authorities having decided to strike a major blow by making it very difficult to export certain semiconductors, even to allied countries, thereby depriving half of Europe’s countries of easy access to US technologies. The global microprocessor market is undergoing a profound transformation, driven by unprecedented technological advances and intensifying geopolitical competition. Once considered a niche industry, microprocessors have become the backbone of modern economies, enabling everything from smartphones to artificial intelligence systems, from IoT to cloud computing. The rise of Nvidia, a global leader in AI, underscores this changing ecosystem. The company is set to replace Intel in the Dow Jones Industrial Average (DJIA), who stated that the update aims to ensure “a more representative exposure to the semiconductors industry and the materials sector, respectively”. This dominance of a few global players underscores the challenges faced by other regions. While companies like Nvidia, AMD, and TSMC have set the standard for innovation, others—including once-mighty Intel—have struggled to keep up. Intel’s recent difficulties highlight the dynamic nature of the industry, where size and legacy alone no longer guarantee success. Instead, the ability to innovate, adapt, and secure supply chains is paramount. And initiatives are flourishing all around the world. As Europe works to bolster its presence in the microprocessor market, Latin America is emerging as a potential partner in the global semiconductor ecosystem. While the region does not yet have major microprocessor manufacturers, countries like Mexico and Brazil are becoming increasingly important in the broader supply chain. The United States, through initiatives such as the CHIPS Act, has sought to deepen its partnerships in Latin America, recognising the region’s strategic value for diversifying production and securing critical resources.  This should put Europe on alert. Indeed, the United States is planning on pushing forward with the development of microprocessor production capabilities across three Latin American countries: Mexico, Panama and Costa Rica. This strategy was unveiled by Secretary of State Anthony Blinken in July 2024 as the ‘Western Hemisphere Semiconductor Initiative.’ Indeed, Mexico is attracting billions in investments in its semiconductor and tech industries. Amazon, announced plans to invest $6 billion in the country by 2026, creating over 50,000 jobs. The Chinese government had identified semiconductors as a priority as early as 1956 and has already channeled an estimated $150 billion to its semiconductor industry. Latin America’s potential lies in its ability to complement the global microprocessor market with assembly, testing, and raw material processing capabilities. Though the region has yet to produce a major semiconductor design firm, its role in the supply chain could expand as global players look to reduce dependency on Asia. This creates opportunities for regional collaboration and investment in the sector while strengthening US access to semiconductors. Indeed, Secretary of State Anthony Blinken stated: “By improving the backbone of our supply chains, better infrastructure will help ensure that the goods our people rely on – semiconductors, electric vehicle batteries, medical supplies – are more affordable, more secure, and made right here in the Americas.” Incoming President Donald Trump’s planned tariffs on foreign imports could however have a real effect on tech giants’ outsourcing of manufacturing to Latin America, though. Even the Biden administration, a few days before its term, has decided to raise the stakes on microprocessors by further tightening sanctions against China. This illustrates the great sensitivity of the subject on the other side of the Atlantic and the need for Europe to rearm itself on the industrial front. Europe’s position in the microprocessor market remains precarious, and without sufficient scope for nearshoring and the development of a robust EU-focused development ecosystem, it could find itself falling way behind global competitors. Historically reliant on foreign suppliers for semiconductors, the region has recognised these strategic risks of this dependency. For Europe, this means creating an ecosystem in which innovative startups and new, EU-based technological initiatives are allowed to flourish. That’s the objective of the European Union’s “Chips Act”, which aims to increase local production capacity and support the development of homegrown technology. However, achieving these goals requires more than policy—it demands the emergence of innovative companies capable of competing on a global scale. Europe already has some important technological “links”, but not yet the whole chain. Among those links of emerging players is SiPearl, a French company specialising in the design of high-performance microprocessors. While still small compared to global giants, SiPearl represents a concrete step toward reducing Europe’s technological dependency. Its processors, designed for use in data centres and supercomputing, align with Europe’s strategic goals for technological sovereignty and innovation. SiPearl’s reliance on Taiwanese manufacturing reflects the broader global interdependence of the microprocessor market, but its designs are uniquely European, tailored to meet the region’s regulatory and security standards. The choice of Taiwan seems obvious at present, given that the processes used in Europe do not meet the requirements. Alternative foundries may be needed, such as Samsung, which has production capacities in South Korea and the USA, or even Intel. Indeed, this Eurocentric approach is at the heart of the firm’s strategy for development. CEO Philippe Notton underscores how the Chips Act does not go far enough in supporting start-up firms like his own: “the European Chips Act is a good start. If we manage to mobilise more public funds in the semiconductor sector to get things moving again, as is being done in most countries, that will be a positive thing.” Notton, like many in the sector, believes that startups are, however, being left behind by this policy. Nonetheless, there are some positive initiatives to support the objectives of the European Chips Act, such as the $3.2 billion investment by Silicon Box to build a semiconductor plant in northern Italy. This announcement was made last March by the Italian Minister of Enterprises, who was happy to show that Italy can “attract the interest of global technology players”. Europe is focusing on fostering innovation and reducing dependency through public-private partnerships. SiPearl is a prime example, but it is not alone. Other European companies, such as Infineon Technologies (Germany) and STMicroelectronics (a Franco-Italian firm), are making significant contributions to the semiconductor industry. MELEXIS, another firm based in Belgium, plays a critical role in developing specialized chips for the automotive industry, supporting Europe’s push for technological sovereignty in key sectors. This approach has also supported the growth of companies such as ASML in the Netherlands, a global leader in lithography machines essential for microprocessor manufacturing, and GlobalFoundries in Germany, which operates one of Europe’s most advanced semiconductor fabrication facilities. CEO Dr. Thomas Caulfield, has a more positive outlook, and emphasised Europe’s strategic position in the semiconductor industry, particularly highlighting the continent’s leadership in lithography through companies like ASML. He stated:  “Europe shouldn’t worry over issues of technology leadership for two reasons. One: You can’t do anything in semiconductors without lithography and Europe has ASML the leader in lithography. Nobody can do anything in semiconductors without giving capex to ASML, so Europe has great control of the semiconductor industry.” This highlights the multilateral ecosystem many are trying to develop in Europe, because together, these firms demonstrate the continent’s potential to become a hub for advanced microprocessor design and production. The microprocessor market is at a crossroads, offering Europe distinct opportunities to redefine its role in the global technology ecosystem. Success, however, will depend on sustained investment, strategic partnerships, and bold innovation. By leveraging its strengths, Europe can be both a leading player in design and manufacture as it used to be just a few decades ago. The opportunities are massive, but so are the risks of falling behind. The rewards of such efforts are, however, substantial: enhanced economic growth, greater technological sovereignty, and a pivotal role in shaping the future of the global microprocessor industry. The text of this work is licensed under  a Creative Commons CC BY-NC 4.0 license.

Energy & Economics
DAVOS, SWITZERLAND - OCTOBER 31, 2021: Building of the Davos Congress Center, place of the world economic Forum wef

Davos 2025 as a Concentrated Expression of Geopolitical Uncertainty

by Vladislav Belov

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском From January 20 to 24, 2025, the traditional World Economic Forum (WEF) took place in Davos. The organizers registered approximately 2,000 participants from over 130 countries, including around 1,600 executives from major corporations, among them 900 CEOs. The political agenda of the WEF was supported by more than 50 heads of state and government. As part of the official program, about 300 sessions were held, 200 of which were broadcast live. Press accreditation was granted to 76 media companies. For official events, 28,043 square meters of space were allocated, accommodating 117 meeting rooms and 23 lounge areas. Additionally, several participating companies (such as HSBC, EY, and Cognizant) rented additional venues separately for their own events. WEF President Børge Brende, announcing this meeting, emphasized that in 2025, due to geopolitical conflicts, ongoing economic fragmentation, and the acceleration of climate change, the forum would be held under conditions of exceptionally high global uncertainty for the first time in decades. The theme of the Forum was “Cooperation in the Age of Intelligence”. On January, WEF experts presented four reports. The first one, a traditional report and the 20th edition, analyzed the most significant global risks and threats facing the international community. The study is based on a survey of over 900 experts from various fields and covers short-term (2025), medium-term (until 2027), and long-term (until 2035) perspectives. The key risks identified for these periods include the following:- in 2025 the most serious threat for most respondents is interstate armed conflicts, followed by extreme weather events and geoeconomic conflicts, including sanctions and trade measures;- by 2027 key risks include disinformation and fake news, which undermine trust in institutions and intensify social polarization, tension, and instability, as well as an increase in cyberattacks and espionage cases;- by 2035 environmental threats are a major concern, including extreme weather events, biodiversity loss, ecosystem destruction, critical changes in Earth's systems, and natural resource shortages. Additionally, technological risks such as the negative consequences of artificial intelligence and other advanced technologies are highlighted.The authors emphasize the need to strengthen international cooperation and increase resilience to global threats. According to them, rising geopolitical tensions, climate challenges, and other risks require coordinated global action to prevent the escalation of existing issues and the emergence of new crises. The second report presents the perspectives of leading experts on the global economic outlook for 2025. They predict moderate economic slowdown, driven by geoeconomic fragmentation and protectionist measures. The most resilient economic growth is expected in the United States and South Asian countries, while Europe, China, and Latin America may face significant challenges. Inflation is projected to rise in most countries, primarily due to increased government spending and shifts in global supply chains. Most experts consider a further escalation of the U.S.-China trade war likely, along with continued regionalization of global trade, leading to the formation of more isolated economic blocs and reduced global interdependence. While experts acknowledge the high potential of artificial intelligence (AI), they emphasize the need for greater investment in infrastructure and human capital to fully leverage its benefits. The third study provides a comprehensive analysis of employment issues. The main conclusion is that ongoing changes, global trends and new technologies will cause 92 million people to leave the labor market worldwide by 2030, but will also create 170 million new jobs. One of the challenges in this regard is the need to improve skills and train for new specialties. The fourth report assesses the state of global cooperation across five key areas: trade and capital, innovation and technology, climate and natural capital, health and well-being, and peace and security. After analyzing more than 40 indicators, the authors conclude that due to heightened geopolitical tensions and instability, overall cooperation remains at the same level. However, positive trends are observed in areas such as climate, innovation, technology, and health. Davos as a Symbolic Benchmark of Switzerland Despite existing criticism, the Davos Forum remains a key platform for the annual interaction of leading figures in global politics, business, and the expert community. Without Switzerland's neutral status, the Davos Forum likely would not exist. However, it was Klaus Schwab, who founded the World Economic Forum (WEF) on January 24, 1971, who played a crucial role in transforming this event and its host location into one of Switzerland’s comparative advantages in political and economic terms. Despite his advanced age, Schwab continues to be an active ideologue and architect of Davos, moderating key discussions while fine-tuning his creation and addressing annual criticism. Yet, he has his own limitations—despite Switzerland’s neutrality and his personal reputation for impartiality, Schwab once again refrained from inviting Russian representatives, even at the level of individual entrepreneurs and experts. Such a move, rather than formal attempts to broaden participation and accessibility, could have enhanced the forum’s status. The participation of a Russian delegation would have been particularly relevant in this critical year for global politics, marked by the unpredictable presidency of Donald Trump, which is set to shape most geopolitical and geo-economic processes worldwide. Including Russian representatives could have strengthened the WEF’s competitive standing, but once again, it did not happen. The Swiss leadership highly values the opportunities that the Davos platform provides, particularly in the realm of foreign policy and, most notably, foreign economic relations. In September 2024, both chambers of the Swiss Parliament—the Council of States (the smaller chamber) and the National Council (the larger chamber)—decided to continue state support for the World Economic Forum (WEF) in Davos and allocated budget funding for the period 2025–2027. During the discussions, lawmakers emphasized that the event strengthens Switzerland’s role as a global hub for international dialogue, while also having a positive economic impact on the Graubünden region. As the host country of the forum, Switzerland actively leverages it to advance its own interests. This year, six out of the seven members of the Swiss Federal Council (Cabinet of Ministers) attended the WEF. As part of the European Free Trade Association (EFTA), Swiss Economy Minister Guy Parmelin signed free trade agreements (FTAs) with Kosovo and Thailand, bringing Switzerland’s total number of FTAs to 37. There are also plans to adapt and update the existing FTA with China. One of Bern’s key priorities remains securing an FTA with the MERCOSUR bloc. As a result, a focal point of this year’s WEF was Argentine President Javier Milei, who, during an “exceptionally warm bilateral meeting,” invited Swiss President Karin Keller-Sutter to visit Buenos Aires in 2025. The Trump Factor The opening of the current WEF coincided with the inauguration of Donald Trump, who, in recent months, has made numerous provocative statements and promises, swiftly beginning their implementation upon taking office on January 20. The U.S. president signed nearly 100 executive orders, including the repeal of 78 regulations enacted by his predecessor, Joe Biden. Among these were directives for all federal agencies and departments to address rising living costs and to end government-imposed censorship of free speech. The most significant orders included the U.S. withdrawal from the Paris Climate Agreement and the World Health Organization, as well as the declaration of a state of emergency at the U.S.-Mexico border to enforce strict immigration controls. In one way or another, the presence of the “new-old” president was felt across nearly all discussion platforms at the forum. On January 23, Donald Trump addressed the participants of the Davos Forum via video conference, outlining the following agenda:- NATO defense spending: Member states should increase their defense budgets from 2% to 5% of GDP to ensure a more equitable distribution of financial burdens within the alliance.- Trade tensions with the EU: The EU and its member states treat economic relations with the U.S. unfairly. European business regulations, including tax policies, disadvantage American companies, particularly in the tech sector, prompting Trump’s call for tariffs on European imports.- Criticism of the EU’s Green Deal: Labeling it as a “new green scam”, Trump emphasized that the U.S. would ramp up oil and gas production and expand power plant construction to become the “capital of artificial intelligence and cryptography”.- Oil prices and the Ukraine conflict: Trump suggested that lower oil prices from Saudi Arabia could help resolve the Ukraine conflict and urged Saudi leadership to take necessary steps, emphasizing their responsibility in the matter.- Tariffs on companies outsourcing production: Countries whose companies manufacture outside the U.S. will face tariffs to incentivize production relocation to American soil.- China's role in Ukraine: Trump called on China to support ending the Ukraine conflict, while stating his own efforts to mediate a peace deal between Russia and Ukraine.- U.S. domestic policy shift: A large-scale deregulation program is underway in the U.S., including tax cuts and potential elimination of diversity, equity, and inclusion (DEI) initiatives, which Trump views as discriminatory.Trump’s speech elicited mixed reactions among forum participants. His focus on protectionist policies and sharp criticism of international partners raised concerns about potential consequences for the global economy, particularly among European attendees. Additionally, his stance signaled an escalation in the strategic rivalry between Washington and Beijing, which is expected to play out through potential trade conflicts, tensions in the South and East China Seas, continued arms sales to Taiwan, and other geopolitical developments. The Europe Factor   At Davos, Europe is traditionally represented by the European Union, with the United States as its primary political and economic partner. Ursula von der Leyen, re-elected as President of the European Commission and beginning her new term on December 1, 2024, addressed the forum on January 21. Her speech largely responded to challenges outlined by Donald Trump before the WEF began, setting out the EU’s key priorities for the coming years: overcoming economic stagnation, enhancing competitiveness, and further integrating the single market across all 27 member states. A central theme of her address was the “Competitiveness Compass” initiative, first introduced in late 2024. This strategy, shaped by recommendations from Mario Draghi’s influential report, aims to drive economic reform and growth within the EU. The European Commission planned to unveil the full document by the end of January. At Davos, Ursula von der Leyen effectively introduced the concept of “Europe United” as a counterbalance to “America First” and cautioned the U.S. against igniting a trade war with the European Union. She emphasized the importance of early engagement and dialogue on shared interests, stating: “Our priority will be to initiate discussions as early as possible, focusing on common interests and readiness for negotiations. We will be pragmatic, but we will always adhere to our principles. Protecting our interests and defending our values is the European way”. At the same time, the European Commission president highlighted the high level of interdependence between the European and American economic models. She underscored that the era of global cooperation has given way to intense geostrategic competition, stating: “The world's largest economies are competing for access to raw materials, new technologies, and global trade routes—from artificial intelligence to clean technologies, from quantum computing to space, from the Arctic to the South China Sea. The race is on”. Christine Lagarde, President of the European Central Bank (ECB) emphasized that Brussels must be prepared for U.S. trade tariffs which are expected to be more “selective and targeted”, especially given the “existential crisis” facing the EU economy. She also noted that the ECB is not overly concerned about the impact of inflation from other countries, including the U.S., on the eurozone. The UK was also represented at Davos, with its delegation led by Chancellor of the Exchequer Rachel Reeves. She used the trip primarily to promote Britain’s economic landscape, focusing on the country’s political and economic stability, its business-friendly environment, and recent government efforts to reduce regulatory barriers—all under the central message: “Now is the time to invest in Britain”. However, the extent to which this narrative aligns with reality remained beyond the scope of the Forum. The true assessment was left to the executives of major corporations with whom Reeves held meetings, including JPMorgan and Goldman Sachs, discussing investment opportunities in the UK's infrastructure and green projects. Additionally, the UK delegation engaged in negotiations aimed at restoring and strengthening ties with sovereign wealth funds and private investors from the U.S. and the Gulf states. The Ukraine Factor Due to the ongoing Ukraine conflict, Davos once again served as a prelude to the Munich Security Conference, which traditionally takes place in early February in Bavaria. While the war and Donald Trump’s influence shaped many discussions, Ukraine was not the central focus of the forum, resulting in a somewhat reduced emphasis compared to previous years. Ukraine’s interests at the World Economic Forum (WEF) were primarily represented by V.Zelensky, who took it upon himself to “educate” European politicians and “interpret” the signals previously sent by Donald Trump. His focus was on defense spending, emphasizing that a significant portion should go toward supporting the Kyiv regime, the presence of foreign troops on Ukrainian territory, and the need for “real security guarantees”. In the first days after taking office, the U.S. president made several key clarifications regarding his previously stated 24-hour timeline for resolving the Ukraine conflict — this period has now been significantly extended. The reason lies in the fact that, regardless of the revocation of Zelensky’s well-known decree, Ukraine must have a head of state authorized to negotiate and officially confirm any agreements or their outcomes. As of late January, no such figure was present in Kyiv, and Washington is aware of this reality. Switzerland, while emphasizing its neutral status (despite being designated by Russia as an “unfriendly state”), consistently maintains that it provides Ukraine only humanitarian aid and diplomatic support at Kyiv’s request. At the 2024 WEF, the well-known Bürgenstock Conference was announced, which later took place in the summer. However, in 2025, no similarly large-scale initiatives were introduced. Nevertheless, discussions at the Forum once again touched on the possibility of granting Switzerland the right to represent Kyiv’s interests on the international stage. Additionally, it was reported that a Swiss-Ukrainian memorandum was signed, with Ukrainian Economy Minister Yulia Svyrydenko representing Kyiv. The agreement focuses on the participation of Swiss private businesses in Ukraine’s reconstruction efforts. V.Zelensky used Davos as an opportunity to meet with world leaders, including German Chancellor Olaf Scholz, who had recently blocked additional aid to Ukraine. However, his main competitor in Germany’s upcoming snap Bundestag elections, Friedrich Merz, was more open to the idea of support, and Zelensky also held a discussion with him. Both meetings were held behind closed doors, and no details were disclosed. Meanwhile, German Green Party leader Robert Habeck managed to avoid an impromptu conversation with Zelensky, who had attempted to engage with him on the spot. At a January 23 briefing, Russian Foreign Ministry spokesperson Maria Zakharova commented on V.Zelensky’s speeches at Davos 2025, describing them, among other things, as “narcotic madness”. The Germany Factor Germany, still holding its position as the political and economic leader of the European Union, was represented at Davos by key political heavyweights: Chancellor Olaf Scholz, Economy and Climate Protection Minister (and Vice-Chancellor) Robert Habeck, and CDU/CSU Chairman Friedrich Merz. All three have been selected by their respective parties as key candidates for chancellor in Germany’s snap Bundestag elections scheduled for February 23, 2025. Given this, it was no surprise that they used the Swiss platform as part of their election campaigns. The current head of the German government had an objective advantage: he delivered a keynote speech on behalf of Germany, in which he focused on the presence of traditional standard factors (the largest economy in the EU; efficient small, medium and large businesses; government support for investments; low level of government debt), which should help to overcome the crisis. Regarding the United States, he declared his interest in maintaining close relations with the new administration, but “without false fawning and servility”. D. Trump and his team, according to him, will keep the whole world on edge in the coming years, but the German leadership will be able to cope with this. O. Scholz's main message is that constructive European-American interaction “is of decisive importance for security throughout the world and is the engine of successful economic development”. It is noteworthy that there were many empty seats in the hall and after the Chancellor's speech there were no questions for him for a long time, which greatly surprised the moderator of the session, K. Schwab. O. Scholz's closest associate, Finance Minister J.Kukis, who was appointed to this position to replace K. Lindner, who was dismissed in early November 2024, was participating in the Forum. He was unable to provide any special pre-election support to his boss during the Forum, and did not distinguish himself in any special way. Incidentally, K. Lindner himself preferred to remain in Germany and continue to fight there for the votes of voters, which are extremely necessary for the liberals to overcome the five percent barrier and get into the Bundestag. F.Merz, who is very likely the future head of the German Cabinet, and his possible future deputy R. Habeck also sought to prove their chances of winning the elections during their speeches. O. Scholz and F.Merz organized meetings with leading representatives of German business, trying to show which of them understood their problems better and was ready to solve them constructively. Despite all their differences, they were united on one issue - the need to soften the provision on the “debt brake” enshrined in the Basic Law (Constitution) and increase support for entrepreneurs. External observers considered that F.Merz was more convincing, including regarding the transatlantic economic vector. R.Habeck unexpectedly engaged in self-criticism during the podium discussion, stating that he initially believed that the difficult economic situation in the country was due to a short-term cyclical crisis, but it turned out that this was a consequence of a long-term structural crisis. Such “self-education” of the minister cost Germany dearly. During the Forum (January 22) in the Bavarian town of Aschaffenburg, an Afghan refugee subject to deportation committed a crime, killing a child and an adult who was protecting him. This event pushed the issue of migration regulation to the top of the election campaign agenda. Unexpectedly, F.Merz found himself in a sticky situation, when his parliamentary request as the leading representative of the opposition in the current Bundestag for stricter controls at the external borders of the FRG could only count on success with the support of the unpopular Alternative for Germany and the center-left Sahra Wagenknecht Union. From Davos, Olaf Scholz traveled to Paris for a meeting with Emmanuel Macron. The French president was unable to attend the Forum due to domestic political circumstances and the need to manage the situation on the ground. The two leaders discussed the prospects for cooperation between their countries in strengthening their economic and political frameworks, as well as the European Union as a whole. None of the three key chancellor candidates managed to present a clear vision for Germany’s economic and political future, one that would be based on creativity, radical progress, technological breakthroughs, and prosperity—transforming the country into an innovation powerhouse not only for Europe but for the collective West as a whole. This means that Germany risks falling behind, failing to establish itself as an economic model capable of competing on equal terms with Donald Trump’s transforming North American economic space.Under Friedrich Merz, Olaf Scholz, and Robert Habeck, Germany faces the danger of remaining trapped in the past, relying too heavily on its post-war economic miracle—Made in Germany—which was achieved through the brilliance of ordoliberal economists and engineers. Davos 2025 made it clear that leaning solely on past achievements is no longer enough to drive a radical leap toward the future. If the German political elite, represented by the “handshake” established parties, remains in such reactionary positions in relation to the need for qualitative changes in economic policy, then the German standard will have no chance to take a leading place among the world's innovation locations. Here we will briefly indicate that, according to the estimates of the authors of the global risks report, the main ones for Germany are (in descending order): a shortage of highly qualified labor, recession / stagnation of the economy, illegal migration, disinformation, and a shortage of energy resources. They are the ones that largely determine the content of the current election campaign for the German parliament. The China Factor Among the political heavyweights representing the countries of the Global South at Davos 2025, the participation of the Chinese delegation, led by Vice Premier of the State Council of the People's Republic of China Ding Xuexiang, stands out. In his keynote speech, he emphasized Beijing's commitment to economic globalization, which is “not a zero-sum game, but a process of mutual benefit and common progress” and declared that protectionism does not lead to success, and trade wars have no winners. Among the key messages were that China is economically attractive, does not seek a trade surplus, is ready to import more competitive and high-quality goods and services to achieve balanced trade, is open to investment from foreign companies, and is ready to solve problems faced by both domestic and foreign firms. While condemning protectionism, he emphasized the importance of multilateralism and the role of the UN. While mildly critical of the “new-old” US president, he never mentioned him by name. Ding repeatedly referred to Xi Jinping, including his initiatives on global development and security. As part of the Forum, Ding Xuexiang hosted a private luncheon with top global financiers and business leaders, including the CEOs of BlackRock, Bridgewater Associates, JPMorgan, Blackstone, and Visa. Discussions centered on China’s ongoing economic reforms, efforts to stabilize the real estate market, stimulate domestic demand, and attract foreign investment. Experts noted that global business leaders responded positively to Ding Xuexiang’s statements, signaling growing confidence in China’s economic direction. In general, he fulfilled the standard mission assigned to him: to increase the international community's confidence in China's economic policy and confirm its role as a key player in the global economy. At the same time, the Forum participants remained concerned about a slowdown in China's economic growth, especially in the context of a possible increase in tariffs by the United States. The Artificial Intelligence Factor One of the leitmotifs of the forum, along with rethinking economic growth, industrial development prospects, climate and restoring trust, were discussions on the rapid development of AI, its impact on the labor market, prospects and challenges associated with the integration of this technology into various sectors of the economy. Experts identified a few trends that will emerge by 2030. AI and automation will increase the demand of enterprises for specialists in the field of AI, big data analysis, digital marketing, and cybersecurity. About half of the current skills of such employees in these areas may become obsolete, which suggests the need for timely adaptation of secondary and higher education to such a challenge. Employees whose professions will become unclaimed due to automation, especially in traditional sectors, will have to undergo advanced training programs. Special attention in the expert sessions was given to the ethical aspects of AI application and the related problems of developing the necessary standards. Issues of international cooperation took an important place, including in the context of ensuring a fair distribution of the benefits of AI application, as well as minimizing the potential risks it generates for society (for example, possible discrimination and bias in algorithms, as well as the protection of users' personal data). In terms of geopolitical rivalry in the field of AI, the global race for leadership in this area, which has already begun between the United States, China and several EU countries, was discussed. Experts pointed out the concerns of the leaders of the latter regarding the need to strengthen the positions of European companies in this area. Strategies for government stimulation of innovation and support for businesses developing AI were discussed. In addition, the participants in the discussions considered the possibilities of using artificial intelligence technologies to achieve sustainable development goals, including combating climate change, improving healthcare and increasing resource efficiency. Examples of using AI to monitor the environment, optimize energy consumption, develop new methods of treating diseases, and improve various aspects of life were of interest. *** The World Economic Forum 2025 in Davos was predictably held under the sign of global challenges, the Ukraine conflict, and increased economic competition, set against the backdrop of geopolitical and geoeconomic changes. Børge Brende, summarizing the event, accurately noted that the current time is “a moment of serious consequences and uncertainties”. This is largely linked to the return of Donald Trump to the White House. At the Forum, the United States’ priorities in strengthening national interests were outlined, including the goal of reducing import flows. This move drew criticism from the European Union and other participants, who expressed growing concerns about the escalation of trade conflicts and the fragmentation of the global economy. The President of the European Commission highlighted the prospects for strengthening the EU’s competitiveness and increasing its independence, considering the intensifying rivalry between the American and Chinese economic spheres. In this regard, representatives of China advocated for reducing trade tensions and strengthening regional alliances, while Germany emphasized the current risks facing its economic standard, outlining the difficulties of finding ways to minimize them. The Ukrainian conflict once again became one of the central topics, but with the formal support of the leaders of the collective West, delegations from the global South showed a restrained reaction to V.Zelensky's speech and messages. Discussions about AI became quite meaningful. Overall, Davos 2025 and its participants confirmed the important role of the WEF as a platform for discussing global challenges and finding constructive answers to them. The need for collective efforts to solve the most pressing issues was noted. One of B. Borge's final messages: the only way to achieve progress in solving global problems is to work together and “find solutions that will make the world a better place”. It is evident that Russia could have significantly contributed to enhancing the effectiveness of this approach.

Energy & Economics
Selective focus of the 2015 United Nations Climate Change Conference, COP 21 or CMP 11 logo on a mobile screen stock image: Dhaka, BD- Feb 27, 2024

Ten Years After the Paris Agreement: The Tragedy of the Overshoot Generation

by Marcelo de Araujo , Pedro Fior Mota de Andrade

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском The Paris Agreement will be ten years old in 2025. It is a good opportunity, then, to reassess the feasibility of its long-term goals and understand what they mean for the current and for the next generations. In a very optimistic scenario, if the goals of the Paris Agreement are achieved, the climate crisis will have been solved by the end of the 21st century. In the meantime, though, the crisis will worsen, as temperature overshoot is very likely to occur by the middle of the century. During the overshoot period, our planet’s average temperature exceeds 1.5°C above pre-industrial levels, which is the threshold proposed by the Paris Agreement. At the end of the overshoot period, which could last from one to several decades, the temperature will begin to fall until it eventually stabilises at 1.5°C at the turn of the century (IPCC 2023, 1810). Expectedly, the success of the Paris Agreement would greatly benefit the “post-overshoot generation”, namely the generation that will live in the first half of the 22nd century. But to ensure the success of the Paris Agreement, the generation that will live in the overshoot period – the “overshoot generation” – will have to remove an enormous amount of GHG (Greenhouse Gases) from the atmosphere. For now, though, it is unclear whether CCS (Carbon Capture and Storage) technologies will be available at a scale that might enable the overshoot generation to achieve the long-term goals of the Paris Agreement. To aggravate the problem, the overshoot generation will also probably have to rely on as-yet untested geoengineering technologies to promote their own survival. As we can see, conflicting interests of three different generations are at stake here, namely: (1) the interests of the current generation, (2) those of the overshoot generation, and (3) the interests of the post-overshoot generation. Given the unequal distribution of power across generations (Gardiner 2011, 36), it is likely that the current generation will tend to further their own interest to the detriment of the overshoot generation, even if, in the end, the climate policies enforced by the current generation do indeed fulfil the interests of the post-overshoot generation. The best possible world is one in which the goals of the Paris Agreement are achieved. Yet, depending on the choices that we make today, the best possible world could also mean the worst possible world that human beings will ever have met on our planet. That will be the fate of the overshoot generation, squeezed between the self-serving policies of the current generation and the climate hopes of the post-overshoot generation. The implications for international relations are momentous, as we intend to show in this article. Possible pathways The Paris Agreement did not establish a concrete deadline for the achievement of the goals set out in Article 2, namely: Maintain the increase in the global average temperature well below 2°C above pre-industrial levels, and make efforts to limit this temperature increase to 1.5°C above pre-industrial levels, recognising that this would significantly reduce the risks and impacts of climate change. The scientific community generally understands that the Paris Agreement aims at climate stabilization at the end of the 21st century. There are two main reasons for this. The first is a constraint imposed by our planet’s climate system. The second is a constraint imposed by agreed upon principles of justice. As for the first reason, we have to bear in mind that an immediate reduction of GHG emissions would not be followed by an immediate decline of global temperature (Dessler 2016, 91). Even if all countries decided to eliminate their respective emissions today, the global temperature would continue to rise for several decades, until it begins to recede and stabilises at the turn of the century. As for the second reason, the Paris Agreement assumed that developing countries could not immediately reduce their own emissions without compromising their own development and the prospect of eradicating poverty. Thus, the Paris Agreement also established in Article 4 that each country could continue to emit GHG until their respective emissions peaked as soon as possible. After peaking, emissions should be rapidly reduced. Thus, the attempt to achieve the goals set out in Article 2 well before the end of the 21st century might turn out to prove inconsistent with the reality of our planet’s climate system and unfair towards developing countries. The problem, however, is that the Paris Agreement did not establish a specific pathway for the achievement of its long-term goals (Figure 1). There is, indeed, a multitude of pathways, but many (if not most) of them involve an overshoot period (Geden and Löschel 2017, 881; Schleussner et al. 2016). And as there are “different interpretations for limiting global warming to 1.5°C”, there emerges the question, then, as to which interpretation could do justice to the conflicting claims of the three different generations considered as a whole, namely the claims of the current generation, those of the overshoot generation, and the claims of the post-overshoot generation (Figure 2). There has been much discussion now on the concept of a “just transition”. But this debate has focused entirely on the claims that the members of the current generation can raise against each other, and not on claims that could be raised – or presumed – across the three generations referred to above. The IPCC (Intergovernmental Panel on Climate Change) Glossary from 2023, for instance, contains a specific entry on this topic: “Just transitions. A set of principles, processes and practices that aim to ensure that no people, workers, places, sectors, countries or regions are left behind in the transition from a high-carbon to a low carbon economy” (IPCC 2023, 1806). The IPCC entry ends with some considerations regarding past generations: “Just transitions may embody the redressing of past harms and perceived injustices”. Interestingly, though, the entry says nothing about the normative implications of a just transition for future generations. A 2023 United Nations document defines the concept of just transition along similar lines (United Nations Economic and Social Council 2023, 3, 12–13). But, again, it understands “just transition” in terms of claims that stakeholders within the current generation, whether at national or international level, can raise against each other. As for the international level, the United Nations document makes the following statement concerning the concept of just transition as applied to international relations: “As countries pick up the pace of their climate change mitigation strategies, it is critical that developed countries do not transfer the burden of the transition onto developing countries” (United Nations Economic and Social Council 2023, 8). The problem, however, is that, as a matter of justice, it is equally critical that the current generation does not transfer the burden of the transition onto the overshoot generation, even if that burden, in the end, turns out to benefit the post-overshoot generation. Such an unequal distribution of burdens across three generations would certainly conflict with the requirements of intergenerational justice (Moellendorf 2022, 161–70; Meyer 2021). Overshoot generation and retroactive mitigation One might perhaps argue that no extra burden is being imposed on the overshoot generation, for the current generation is already having to face challenges that the overshoot generation, supposedly, will not have to face. The overshoot generation, one might suggest, will inherit from the current generation all the benefits resulting from the energy transition, but without having to bear the costs that the transition imposes on the current generation. The idea here is that by the middle of this century global emissions will have already peaked and will be declining at an accelerated pace, towards stabilisation at 1.5°C above the pre-industrial level at the end of this century. Thus, the overshoot generation can arguably reap the benefits of green energy, as long as the current generation remains free, at least for the time being, to emit GHG further, which is necessary to finance the human and technological development that the overshoot generation will need later. This claim, however, overlooks a crucial fact about the climate crisis – a fact that has not been given due attention in the public debate on climate policies. In a very optimistic scenario, the overshoot generation will not have the burden of reducing their own emissions because they will be able to rely on carbon-free energy. The problem, however, is that the overshoot generation will still have to retroactively mitigate the emissions of previous generations – including, of course, the emissions of the current generation. We call this process “retroactive mitigation”, for what is at stake here is not reduction and phasing out of one’s own emissions, but the removal of massive amounts of GHG, which previous generations failed to mitigate in the past. In a 2014 report, the IPCC realised that simply reducing GHG emissions would no longer be enough to preclude irreversible climate change. Removal of GHG would also be necessary (IPCC 2014, 12). The IPCC called attention to yet another problem: it was unclear whether CCS (Carbon Capture and Storage) technologies, including DAC (Direct Air Capture), could be deployed on a global scale in time to avoid a climate disaster. In a 2018 report, the IPCC was even less confident about the future development and scaling-up of CCS technologies (IPCC 2018, 136). To make matters worse, two further factors must be taken into consideration. (1) Recent studies show that there are practically no pathways left for the achievement of the Paris Agreement goals without the massive deployment of CCS (Smith et al. 2023). And (2) it has become increasingly probable that the overshoot generation will also have to deploy geoengineering technologies to cope with ever more frequent heatwaves (Moellendorf 2022, 161–70). It could perhaps be argued that afforestation and preservation of existing forests could be used instead of CCS technologies. However, the amount of land and water that would be necessary for the creation of new forests is probably larger than the amount of land and water available. Moreover, the attempt to create new forests on such a large scale might compromise the water and food security that the overshoot generation will need to promote their own climate adaptation (Shue 2017, 205). It is also necessary to take into account the amount of time new forests need to grow, not to mention the risk of fire. In this case, forests stop absorbing GHG and become GHG emitters themselves (Gatti et al. 2021). Implications for international relations In the aftermath of the Second World War, human being’s capacity to trigger catastrophic events at a global scale became increasingly apparent. As Garrett Hardin aptly put the problem in 1974: “No generation has viewed the problem of the survival of the human species as seriously as we have” (Hardin 1974b, 561). But while even realist thinkers such as Hans Morgenthau and John Herz argued for international cooperation in the face of global threats, Hardin himself advanced what he called the “lifeboat ethics”. According to Hardin, instead of engaging in international cooperation, richer states should behave like lifeboats and resist the temptation to help individuals from poorer states to cope with environmental disasters or famines. This, he argued, might undermine richer states’ capacity to secure their own survival (Hardin 1974a; 1974b). In his The Limits of Altruism: An Ecologist’s View of Survival from 1977, Hardin resumes his criticism of international cooperation to alleviate the plight of poorer states: We will do little good in the international sphere until we recognize that the greatest need of a poor country is not material: call it psychological, moral, spiritual, or what you will. The basic issue is starkly raised in a story of personal heroism that unfolded in South America a few years ago (Hardin 1977, 64). Hardin goes on to recall the 1972 Andes plane crash, turned into a feature film in 2023. Hardin suggests that the passengers who had survived the crash would not have taken the initiative to save their own lives had they not heard on the radio that the search efforts to rescue them had been called off. Hardin’s conclusion is this: “This true story, I submit, bears a close resemblance to the moral situation of poor countries. The greatest gift we can give them is the knowledge that they are on their own” (Hardin 1977, 65). Hardin, of course, does not take into consideration the extent to which richer states themselves may be responsible for the plight of poorer states. Hardin’s self-help approach to international relations is in line with political realism. But when major realist thinkers themselves addressed the question of human survival, around the same time Hardin advocated his lifeboat ethics, they came to entirely different conclusions. Authors such as Morgenthau and Herz realized that nation-states had become unable to protect their own citizens in the face of global catastrophes triggered by the depletion of the environment or the outbreak of a nuclear war. As Morgenthau put the problem in 1966: “No nation state is capable of protecting its citizens and their way of life against an all-out atomic attack. Its safety rests solely in preventing such an attack from taking place” (Morgenthau 1966, 9). In a 1976 article on the emergence of the atomic age, Herz made a similar point: “Nuclear penetrability had rendered the traditional nation-state obsolete because it could no longer fulfill its primary function, that of protection” (Herz 1976a, 101). Both Morgenthau and Herz argued for international cooperation – or perhaps even the dissolution of the system of states (Morgenthau 1978, 539) – as the better strategy to avert global catastrophic risks (Herz 1976a, 110; 1976b, 47). Herz later also theorized about the concept of “ecological threat” and argued for the development of a new interdisciplinary field, which he aptly named “survival studies” (Herz 2003; Seidel 2003; Laszlo and Seidel 2006, 2–3; Graham 2008; Stevens 2020). During the overshoot period, as heatwaves and other climate-related extreme events become more severe and frequent, people in poorer countries are likely to suffer the most. Mass migrations are likely to occur on an unprecedented scale (Vince 2022). Given the current popularity of anti-migration measures both in the United States and Europe, it is imaginable, then, that the lifeboat ethics will strike a chord with future conservative governments. That would be an error, for the assumption that governments will be protecting their own citizens by way of making their borders impenetrable to climate migrants is misleading. The “ecological threat” cannot be held back by higher walls. Lifeboat ethics will make everyone worse-off. Back in the 1960s, Martin Luther King may not have had climate change or mass migration in mind, but his words strike us as even more poignant now: “We may have all come on different ships, but we’re in the same boat now” (as quoted by former American President Barack Obama). There is only one boat, carrying three generations of hopeful passengers with equal legitimate claims to a better climate. It is a long journey. Let us not allow our only boat to go down. Final remarks The scenario in which the overshoot generation will have to live is not an encouraging one, but it is even less inhospitable than the scenario that the post-overshoot generation will have to face if the goals of the Paris Agreement are not met. It is up to the current generation to make sure that the overshoot period is as short as possible, and that the overshoot generation will not only be in a position to adapt to unprecedented climate scenarios in the history of human civilization, but also fulfil hopes of the post-overshoot generation. Figures Figure 1: Pathways compatible with the goals of the Paris Agreement (IPCC 2018, 62). FIGURE01  Figure 2: Pathways that would limit global warming to 1.5°C (IPCC 2018, 160).   Acknowledgements Marcelo de Araujo thanks Prof. Darrel Moellendorf for the invitation and the Alexander-von-Humboldt Foundation for the financial support. Support for this research has also been provided by the CNPq (The National Council for Scientific and Technological Development) and FAPERJ (Carlos Chagas Filho Research Support Foundation). An earlier draft of this article was presented at the University of Graz, Austria, Section for Moral and Political Philosophy, in 2024, with thanks to Prof. Lukas Meyer for the invitation. Pedro Fior Mota de Andrade benefited from financial supported provided by CNPq (National Council for Scientific and Technological Development). References Dessler, Andrew Emory. 2016. Introduction to Modern Climate Change. Second edition. New York, NY, USA: Cambridge University Press. Gardiner, Stephen. 2011. A Perfect Moral Storm: The Ethical Tragedy of Climate Change. Oxford: Oxford University Press. Gatti, Luciana V., Luana S. Basso, John B. Miller, Manuel Gloor, Lucas Gatti Domingues, Henrique L. G. Cassol, Graciela Tejada, et al. 2021. ‘Amazonia as a Carbon Source Linked to Deforestation and Climate Change’. Nature 595 (7867): 388–93. https://doi.org/10.1038/s41586-021-03629-6. Geden, Oliver, and Andreas Löschel. 2017. ‘Define Limits for Temperature Overshoot Targets’. Nature Geoscience 10 (12): 881–82. https://doi.org/10.1038/s41561-017-0026-z. Graham, Kennedy. 2008. ‘“Survival Research” and the “Planetary Interest”: Carrying Forward the Thoughts of John Herz’. International Relations 22 (4): 457–72. https://doi.org/10.1177/0047117808097311. Hardin, Garrett James. 1974a. ‘Lifeboat Ethics: The Case against Helping the Poor’ 8 (September):38–43. ———. 1974b. ‘Living on a Lifeboat’. BioScience 24 (10): 561–68. ———. 1977. The Limits of Altruism: An Ecologist’s View of Survival. Bloomington: Indiana University Press. Herz, John. 1976a. ‘Technology, Ethics, and International Relations’. Social Research 43 (1): 98–113. ———. 1976b. The Nation-State and the Crisis of World Politics: Essays on International Politics in the Twentieth Century. New York: D. McKay. ———. 2003. ‘On Human Survival: Reflections on Survival Research and Survival Policies’. World Futures 59 (3–4): 135–43. https://doi.org/10.1080/02604020310123. IPCC, ed. 2014. Climate Change 2014: Mitigation of Climate Change Working Group III Contribution to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. New York: Cambridge university press. https://www.ipcc.ch/site/assets/uploads/2018/02/ipcc_wg3_ar5_full.pdf. ———. 2018. ‘Global Warming of 1.5°C. An IPCC Special Report on the Impacts of Global Warming of 1.5°C above Pre-Industrial Levels and Related Global Greenhouse Gas Emission Pathways, in the Context of Strengthening the Global Response to the Threat of Climate Change, Sustainable Development, and Efforts to Eradicate Poverty’. Edited by V Masson-Delmotte, P Zhai, HO Pörtner, D Roberts, J Skea, PR Shukla, A Pirani, et al. Intergovernmental Panel on Climate Change. https://www.ipcc.ch/sr15/. ———, ed. 2023. ‘Annex I: Glossary’. In Climate Change 2022 – Mitigation of Climate Change, 1st ed., 1793–1820. Cambridge University Press. https://doi.org/10.1017/9781009157926.020. Laszlo, Ervin, and Peter Seidel, eds. 2006. Global Survival: The Challenge and Its Implications for Thinking and Acting. 1st ed. Change the World. New York: SelectBooks. Meyer, Lukas. 2021. ‘Intergenerational Justice’. The Stanford Encyclopedia of Philosophy. 2021. https://plato.stanford.edu/archives/sum2021/entries/justice-intergenerational/. Moellendorf, Darrel. 2022. Mobilizing Hope: Climate Change and Global Poverty. New York: Oxford University Press. Morgenthau, Hans. 1966. ‘Introduction’. In A Working Peace System, D. Mitrany, 7–11. Chicago: Quadrangle Books. ———. 1978. Politics among Nations: The Struggle for Power and Peace. New York: Alfred Knopf (Fifth Edition, Revised, 1978). Schleussner, Carl-Friedrich, Joeri Rogelj, Michiel Schaeffer, Tabea Lissner, Rachel Licker, Erich M. Fischer, Reto Knutti, Anders Levermann, Katja Frieler, and William Hare. 2016. ‘Science and Policy Characteristics of the Paris Agreement Temperature Goal’. Nature Climate Change 6 (9): 827–35. https://doi.org/10.1038/nclimate3096. Seidel, Peter. 2003. ‘“Survival Research:” A New Discipline Needed Now’. World Futures 59 (3–4): 129–33. https://doi.org/10.1080/02604020310134. Shue, Henry. 2017. ‘Climate Dreaming: Negative Emissions, Risk Transfer, and Irreversibility’. Journal of Human Rights and the Environment 8 (2): 203–16. https://doi.org/10.4337/jhre.2017.02.02. Smith, Stephen, Oliver Geden, Gregory Nemet, Matthew Gidden, William Lamb, Carter Powis, Rob Bellamy, et al. 2023. ‘State of Carbon Dioxide Removal – 1st Edition’, January. https://doi.org/10.17605/OSF.IO/W3B4Z. Stevens, Tim. 2020. ‘Productive Pessimism: Rehabilitating John Herz’s Survival Research for the Anthropocene’. In Pessimism in International Relations: Provocations, Possibilities, Politics, edited by Tim Stevens and Nicholas Michelsen, 83–98. Cham, Switzerland: Palgrave Macmillan, Springer Nature. United Nations Economic and Social Council. 2023. ‘Committee for Development Policy Report on the Twenty-Fifth Session (20–24 February 2023)’. Supplement No. 13 E/2023/33. Official Records. New York: United Nations. https://documents.un.org/doc/undoc/gen/n23/088/80/pdf/n2308880.pdf. Vince, Gaia. 2022. Nomad Century: How Climate Migration Will Reshape Our World. First U.S. edition. New York: Flatiron Books. The text of this work is licensed under  a Creative Commons CC BY-N

Energy & Economics
With Interim President of Burkina Faso Ibrahim Traore. Photo: Alexander Ryumin, TASS

Russian and waiting

by William Decourt , Spenser Warren

Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском Western missteps in Africa are creating an opening for Russia to deepen its influence. Recent protests against International Monetary Fund (IMF)-imposed austerity measures have rocked several African states. Kenya, a long-time partner of the United States and a key contributor to UN peacekeeping operations in Haiti, experienced violent clashes between government security forces and anti-austerity protestors over tax hikes in a controversial finance bill. Simultaneously, many protesters saw Kenyan engagement in Haiti as footing the bill for American security interests while ordinary Kenyans struggled to make ends meet. Soon after, similar protests against IMF measures spread to Nigeria. Analysts and locals are concerned that spreading protests may threaten stability across Africa. Citizens of other countries continue to voice their displeasure with the political and economic status quo through protest (in Mozambique) and at the ballot box (in Botswana). IMF loans come with significant stipulations, including reforms to financial systems and governance. Critics of these conditions frequently malign the IMF as a violator of sovereignty. Changes to economic and governing models, combined with high debts and economic stress, increase the costs of everyday products and diminish purchasing power across the continent. To many ordinary citizens, the West is benefiting from the fruit of African resources while hindering Africans’ access to the global economy. Publics in these countries demand alternatives to IMF funding, protesting governments to oppose IMF-imposed austerity. Youth, an increasingly important demographic, are especially active. Many of these young people are college-educated but fail to secure adequately paid employment in skilled industries. The informal economy is growing but increasingly separated from formal and international economies. IMF austerity measures are driving the continent to economic crisis and protest that may have lasting effects anathema to US foreign policy and the liberal international order. Some already see China as a viable alternative, although public opinion of Chinese influence is mixed. Elsewhere, faded Cold War memories make Russia a relatively unknown economic and political alternative. So, while recent Western actions in Africa have put long term relationships at risk, Russia is slowly increasing its influence on the continent. In fact, the Kremlin has already taken action and is engaged in the politics surrounding the various debt crises in African nations. African countries owe debts to multiple international actors, including Russia. However, Moscow has forgiven debts owed by many of these countries, coupling debt relief with additional economic benefits, including an influx of grains and energy resources. It has also deepened defense cooperation with several African countries. This cooperation often includes contracts for weapons sales and the deployment of irregular military units, including the Wagner Group. Diplomatic actions such as the above have led some protestors to see Russia as a viable alternative to IMF funding and partnerships with the US and Europe. In a visual representation of this phenomenon, protestors have been seen waving Russian flags at mass gatherings across Africa. Russia appears to receive the greatest support in the Sahel, where governments have failed to curb political instability and deliver on economic development promises. Publics in the region were already angry with the continued postcolonial military presence of France, and Russia took advantage. Mass publics are not the only actors seeking alternatives, ruling elites also see Russia as an attractive partner. Russian defense cooperation and the presence of irregular forces bolster these regimes in the face of increasing civilian protests over poor governance or human rights. Still, Russia has not yet made the gains it could. The war in Ukraine is hurting Africans and contributing to economic stress as global grain prices have skyrocketed. Some perceive Russia as exacerbating the problems of failed governance through its use of Wagner Group formations to back corrupt officials, protect corporate interests, and bolster unpopular governments. Russian interest in the region is also less significant than in the Middle East, Eastern Europe, or the Arctic, where Russia has more proximate strategic, economic, and political goals. Rather than rushing in, Russia’s economic presence in Africa is slowly advancing Moscow’s goals on the international stage. When Russia sought to undermine financial, technological, and energy sanctions from the West as a result of its invasion of Ukraine, it turned to Africa to find new consumers for food products, energy, and arms. Already, in the wake of the invasion, only half of the continent voted to condemn Russia. Such voting patterns at the UN indicate greater support for Russia in Africa than in other regions around the world, even if distrust of Russia remains high in some parts of the continent. Forecasted crises could increase Russian influence on the continent as well. Shocks generated by the African debt crisis could become a proximate cause for geopolitical and geoeconomic shifts. Rapid demographic changes and disastrous climate events (e.g., droughts and floods) exacerbate existing economic and migratory challenges. Since the tentacles of Russian economic and security influence, as well as misinformation, are already present in Africa, such future crises could pull multiple African states further into Russian orbit, and away from Western countries and institutions. Further alignment of African states with Russia would have several drawbacks. Russia would discourage democratization and use security assistance to bolster dictators across the continent. Environmentally sustainable development is also likely to be hampered. Russia may increase the extraction of natural resources in environmentally damaging ways. Additionally, Russian energy exports will be oil and gas, eroding the already significant investment and progress in green energy development many African political economies have made. As Western missteps create openings for Russia to gain a foothold in Africa, they also set the stage for other global powers to capitalize on the vacuum. Chinese-built infrastructure in Africa also contributed to debt burdens, but unlike Western approaches tied to IMF austerity measures, China is recalibrating its strategy. By shifting to smaller projects with lower debt exposure and promoting green energy development overseas, China positions itself as a more appealing partner. This strategy not only bolsters China’s domestic solar and EV industries but also enhances its soft power by responding to local economic needs. Moreover, as Western policy blunders alienate African publics and governments, both Russia’s and China’s influence may grow. Russia’s gains in the region could indirectly strengthen China’s position by fostering broader skepticism of Western-led systems, aligning African leaders more closely with Beijing’s geopolitical goals, including its stance on Taiwan. Africa is a burgeoning continent. One in four humans will be African by 2050. If the US and Europe pass on opportunities to engage with a continent of emerging green development powers and an increasingly educated demographic bulge, Western policies will undermine their own power and influence in the international order. Russia’s quiet increase in trade and security assistance offers an established alternative. Meaning ultimately, both Russia and China, may play the long game, gaining incremental support from a region of one billion people at a time. This work is licensed under the Creative Commons Attribution 4.0 International License (CC BY 4.0) [add link: https://creativecommons.org/licenses/by/4.0/]

Energy & Economics
Trump - Putin - Flags

The World Awaits Change

by Andrei Kortunov

Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском “Changes! We’re waiting for changes!” proclaimed Viktor Tsoi nearly 40 years ago, at the dawn of the Soviet perestroika. If one were to summarize the multitude of diverse and contradictory events, trends, and sentiments of the past year in a single phrase, it would be that the modern world is eagerly awaiting change. Much like the former USSR in the 1980s, few today can clearly define what these changes should entail or what their ultimate outcome will be. Yet, the idea of maintaining the status quo has evidently found little favor with the public over the past year. This impatient anticipation of change was reflected, for instance, in the outcomes of numerous elections held over the past 12 months across the globe. In total, more than 1.6 billion people went to the polls, and in most cases, supporters of the status quo lost ground. In the United States, the Democrats suffered a resounding defeat to the Republicans, while in the United Kingdom, the Conservatives were decisively beaten by the Labour Party. In France, Emmanuel Macron's once-dominant ruling party found itself squeezed between right-wing and left-wing opposition, plunging the Fifth Republic into a deep political crisis. The seemingly stable foundations of political centrism were shaken in Germany, South Korea, and Japan. Even the party of the highly popular Indian Prime Minister Narendra Modi failed to retain its parliamentary majority after the elections, and in South Africa, the African National Congress led by Cyril Ramaphosa also lost its majority. Pessimists might argue that abandoning the status quo in itself solves no problems, and the much-anticipated changes, as the final years of the Soviet Union demonstrated, do not necessarily lead to positive outcomes. Replacing cautious technocrats with reckless populists often backfires, affecting those most critical of the entrenched status quo. Optimists, on the other hand, would counter that the rusted structures of state machinery everywhere are in desperate need of radical modernization. They would add that the costs inevitably associated with maintaining the existing state of affairs at all costs far outweigh any risks tied to attempts to change it. The international events of the past year are also open to various interpretations. Pessimists would undoubtedly point out that none of the major armed conflicts carried over from 2023 were resolved in 2024. On the contrary, many of them showed clear tendencies toward escalation. For instance, in late summer, Ukraine launched an incursion into the Kursk region of Russia, and in mid-November, the U.S. authorized Kyiv to use long-range ATACMS missiles against targets deep within Russian territory. Meanwhile, the military operation launched by Israel in Gaza in the fall of 2023 gradually expanded to the West Bank, then to southern Lebanon, and by the end of 2024, to parts of Syrian territory adjacent to the Golan Heights. From the optimists' perspective, however, the past year demonstrated that the disintegration of the old international system has its limits. A direct military confrontation between Russia and NATO did not occur, nor did a large-scale regional war break out in the Middle East, the Taiwan Strait, or the Korean Peninsula. The economic results of 2024 are equally ambiguous. On one hand, the global economy remained heavily influenced by geopolitics throughout the year. The process of “technological decoupling” between the U.S. and China continued, and unilateral sanctions firmly established themselves as a key instrument of Western foreign policy. On the other hand, the world managed to avoid a deep economic recession despite the numerous trade and investment restrictions. Global economic growth for the year is expected to reach around 3%, which is quite respectable for such turbulent times, especially considering that the long-term effects of the COVID-19 pandemic have not yet been fully overcome. In 2024, the average annual global temperature exceeded pre-industrial levels by more than 1,5 °C for the first time, crossing another critical “red line”. However, the UN Climate Change Conference (COP29) held in November in Baku fell short of many expectations. At the same time, China reached its peak carbon emissions by the end of the year, achieving this milestone a full five years ahead of previously announced plans. In the past year, the UN Security Council managed to adopt only 12 resolutions, mostly of a humanitarian nature, clearly reflecting the declining effectiveness of this global governance body. For comparison, in 2000, the Security Council approved 29 resolutions, including key decisions on conflict resolution in the Balkans and Africa. At the same time, 2024 saw continued efforts to explore new formats for multilateral cooperation, including mechanisms within the BRICS group, which held its 16th summit in Kazan for the first time in its newly expanded composition. With enough imagination, one can easily find evidence in the past 12 months to confirm any omen or superstition traditionally associated with leap years. However, all these signs and superstitions predicting upheavals and catastrophes—while aligning with the pessimistic conclusions about the year now ending—do not apply to the year ahead. Human nature, after all, tends to lean more towards optimism than pessimism; if it were the other way around, we would still be living in caves. As they bid farewell to a difficult and challenging year, people around the world continue to hope for better times. And the mere act of hoping for the best is already significant in itself. As Johann Wolfgang von Goethe aptly remarked, “Our wishes are forebodings of our capabilities, harbingers of what we are destined to achieve”. Originally published in Izvestia.

Energy & Economics
Press Conference by European Commission President Ursula von der LEYEN and Mario DRAGHI on the Report on the Future of EU Competitiveness in Brussels, Belgium on September 9, 2024.

Press statement by President von der Leyen on the occasion of the Mercosur leaders' meeting

by Ursula von der Leyen

Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском Ladies and Gentlemen, Today marks a truly historic milestone. Let me begin by thanking the Chief Negotiators for their dedication and determination. They worked tirelessly, over many years, for an ambitious and balanced agreement – and they succeeded. The bond between Europe and the Mercosur countries is truly one of the strongest in the world. It is a bond anchored in trust, enriched by a shared heritage, that spans centuries of mutual learning and growth. In fact, exactly 30 years ago, in 1994, my predecessor Jacques Delors stood here in Montevideo. He met with your father, dear Luis, who was then President of Uruguay. Together they shared a bold vision. A vision of deeper integration, not only within Europe and Mercosur, but also between them. Today, in Montevideo, we are turning that vision into reality. We are strengthening this unique partnership as never before. And in doing so, we are sending a clear and powerful message to the world. First, in an increasingly confrontational world, we demonstrate that democracies can rely on each other. This agreement is not just an economic opportunity, it is a political necessity. We are like-minded partners. We both believe that openness and cooperation are the true engines of progress and prosperity. I know that strong winds are blowing in the opposite direction – towards isolation and fragmentation. But this agreement is our clear response. We stand together on the global stage, as partners. Second, we are sending a message to our people and businesses in our regions: This agreement was designed with your interests at heart. It is made to work for you. It means: more jobs – and good jobs – more choices and better prices. The European Union and Mercosur create one of the largest trade and investment partnerships the world has ever seen. We are taking barriers down and we are allowing investments in. We are forming a market of over 700 million consumers. This partnership will strengthen entire value chains; it will develop strategic industries; it will support innovation; and it will create jobs and values, on both sides of the Atlantic. Third, we are showing the world that trade can – and must – be guided by values. Trade agreements are more than economic frameworks. They are a way to build communities of shared values. The EU-Mercosur agreement reflects our steadfast commitment to the Paris Agreement and to the fight against deforestation. President Lula's efforts to protect the Amazon are welcome and necessary. But preserving the Amazon is a shared responsibility of all humanity. This agreement ensures that investments respect Mercosur's extraordinary yet fragile natural heritage. My fourth message is that, economically, this is a win-win agreement. Europe is already a leading investment and trade partner for Mercosur. So you know how we do business together. We are focused on fairness and mutual respect. EU-Mercosur will bring meaningful benefits to consumers and businesses, on both sides. It will facilitate European investments in strategic industries across all Mercosur countries: like sustainable mining, renewable energy and sustainable forest products, just to name a few. It will also make it easier to invest in sectors that directly impact the people's daily lives. For example, expanding the electricity grid to rural and remote areas and advancing digitalisation across the region. Finally, let me address my fellow Europeans: This agreement is a win for Europe. 60,000 companies are exporting to Mercosur today – 30,000 of them are small and medium-sized enterprises. They benefit from reduced tariffs, simpler customs procedures and preferential access to some critical raw materials. This will create huge business opportunities. To our farmers: We have heard you, listened to your concerns and we are acting on them. This agreement includes robust safeguards to protect your livelihoods. EU-Mercosur is the biggest agreement ever, when it comes to the protection of EU food and drinks products. The agreement protects 350 EU geographical indications. In addition, our European health and food standards remain untouchable. This is the reality – the reality of an agreement that will save EU companies EUR 4 billion worth of export duties per year while expanding our markets and opening new opportunities for growth and jobs on both sides. I want to thank President Lacalle Pou for hosting this Summit and for bringing us together in Montevideo. This is a good day for Mercosur, a good day for Europe and a landmark moment for our shared future. A whole generation dedicated their effort, vision and determination to bring this agreement to life. Now, it is our turn to honour that legacy. Let us ensure that this agreement delivers on its promises and serves the generations to come. Thank you very much.